Earnings Signals from Big Tech: AI Demand Continues to Heat Up

Summary

This week marks a peak earnings period for major technology companies, with many releasing both earnings results and forward guidance. To date, ASML, Meta, and Microsoft have all reported revenue and profit figures for the previous quarter that exceeded market expectations, while also announcing larger-than-expected increases in capital expenditure for the year ahead. Their aggressive investment in AI and related infrastructure has further strengthened market confidence in the long-term outlook for technology stocks.

1. ASML reported record-high revenue for both the fourth quarter and full year, reaching EUR 9.7 billion and EUR 32.7 billion, respectively. Fourth-quarter order intake surged from EUR 5.4 billion in the prior quarter to EUR 13.2 billion, of which EUR 7.4 billion came from EUV systems, highlighting robust demand for EUV technology as the primary driver of revenue growth. For the first quarter of this year, ASML expects net sales of approximately EUR 8.2–8.9 billion, with a gross margin of around 51%–53%. Full-year net sales are projected to reach approximately EUR 34–39 billion.
   
2. Meta reported fourth-quarter revenue of USD 59.89 billion and EPS of USD 8.88, both exceeding market expectations, primarily driven by strong advertising performance. The company’s guidance for first-quarter revenue and full-year capital expenditure also surprised the market. Meta expects first-quarter revenue of USD 53.5–56.5 billion, above the consensus estimate of USD 51.41 billion. Full-year capital expenditure, mainly allocated to AI infrastructure, computing capacity, and talent, is projected at USD 115–135 billion, significantly higher than the market expectation of USD 110.7 billion and nearly double last year’s USD 72.2 billion. Meta also indicated that new models and products are expected to be launched in the coming months.
3. Microsoft reported quarterly revenue of USD 81.27 billion and EPS of USD 5.16, both surpassing market expectations. Capital expenditure reached USD 37.5 billion, representing a year-over-year increase of 66%. Microsoft’s commercial bookings were primarily driven by demand from OpenAI and Anthropic, surging by 230%. Commercial remaining performance obligations (RPO) rose to USD 625 billion, up approximately 110% year over year, with OpenAI’s USD 250 billion cloud services contract accounting for the largest portion.

Commentary

1. ASML’s record profits and strong large-scale order demand initially drove the stock up as much as 10% following its after-hours earnings release on January 28. However, with backlog orders reaching EUR 38.8 billion by the end of 2025, the market grew concerned about whether capacity expansion could keep pace with the exceptionally high order volume, leading the stock to close down 2.18% on the day.
2. Meta’s strong earnings, upbeat guidance, and increased AI-related capital expenditure pushed its shares up as much as 11% in after-hours trading on January 28.
3. Despite Microsoft’s earnings beat, its share price fell as much as 6% after hours on January 28, as cloud revenue growth slowed slightly to 39% from 40% in the prior quarter, below the consensus expectation of 39.4%.

We believe that earnings results released by major technology companies through this week indicate that underlying fundamentals remain broadly positive. AI-driven demand continues to support strong corporate performance, while major cloud service providers (CSPs) remain highly committed to expanding data center capacity to enhance computing power and model development capabilities. As AI deployment scales further, we view energy supply to support AI operations, along with the successful commercialization of AI applications, as key focal points for future corporate development. Given the constraints on water and electricity resources, ensuring the creation and availability of stable and sufficient power supply will be critical to the long-term operation of AI as hardware and software continue to be deployed. At the same time, the ability of AI applications to generate tangible cash flows for enterprises will be a key metric for evaluating returns on AI investments and will play a decisive role in shaping market perceptions of the AI growth cycle.