A Tale of Two Spenders: Meta Soars on Ad Strength While Microsoft Sinks on Azure Slowdown

A Tale of Two Spenders: Meta Soars on Ad…

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Hello Peter Anthony Hovis,

A Tale of Two Spenders: Meta Soars on Ad Strength While Microsoft Sinks on Azure Slowdown

Wall Street received a flood of new catalysts yesterday that could dictate the market’s sentiment over the next few weeks.

First, the Federal Reserve.

In a widely expected move, the Federal Open Market Committee voted 10-2 to keep the benchmark rate steady at 3.5% to 3.75%.

Powell struck a tone of hawkish patience and refrained from signaling any imminent rate cuts. While he acknowledged a “clear improvement” in the economic outlook and signs of labor market stabilization, he bluntly refused to declare victory. “I wouldn’t go too far with that,” Powell said regarding the labor data.

“The Fed song remains the same — lower interest rates may be coming, but investors will have to remain patient,” said Ellen Zentner of Morgan Stanley Wealth Management. “With signs of stabilization in the labor market and inflation holding steady, the Fed is in position to play the wait-and-see game.”

(Photo: Nitashia Johnson/Bloomberg)

The consensus isn’t absolute, however.

Governors Christopher Waller and Stephen Miran dissented in favor of a cut, a rare crack in the Fed’s armor that suggests the path to a summer cutmmight be contentious.

As the closing bell rang and the Fed drama faded, the spotlight shifted to earnings.

Microsoft Corp. sank 5% in late trading, punished for a report that combined eye-watering spending with slowing growth. The software giant poured a record $37.5 billion into capital expenditures this quarter (up 66% from a year ago), yet revenue growth in its critical Azure cloud unit decelerated to 38%.

The message from investors was sharp: spending billions is fine, but only if the payoff is immediate.

Meta Platforms Inc., however, flipped that narrative on its head.

The social media titan stunned markets with a forecast for staggering capital expenditures of $115 billion to $135 billion for the full year.

Yet, shares surged more than 10%.

Why the difference?

Meta’s core ad business is booming, which is effectively bankrolling its AI ambitions. The company beat revenue estimates with a $53.5 billion to $56.5 billion forecast, proving that its “front-loading” strategy of amassing computing power for future “superintelligence” is built on a fortress of current cash flow.

Rounding out the tech trifecta, Tesla Inc. climbed in late hours as profits beat estimates, defying concerns about a slowing EV market. Investors were likely excited about Tesla’s big ambition in robotics and autonomous driving, where the company will make a $20 billion investment to deepen its focus on AI.

(Photo: Getty Images)

It is also halting production of its S and X model vehicles and repurposing the production facilities in Fremont, California, for Optimus.

“If Tesla is going to do as well as the bulls are thinking, it’s going to be with the Robotaxi and robotics,” said Matt Maley, chief market strategist for Miller Tabak + Co. “So, this investment is exactly what the bulls wanted to hear.”

Yesterday’s Big Tech earnings reports showed that massive investments in artificial intelligence are far from over. The economy is accelerating, and Big Tech companies are still making money. So, investors are back cheering for big AI investments.

Why MongoDB is the Hidden Winner in the AI Boom

Today’s Stock Pick: MongoDB, Inc. (MDB)

MongoDB is the company that modernized the digital filing cabinet, which made it one of the beloved companies for Silicon Valley engineers.

For decades, businesses stored data in rigid spreadsheets of rows and columns, which was great for accounting but terrible for modern apps that handle messy, changing data like social media posts, product catalogs, or mobile sensor readings.

So, MongoDB created a different kind of database that stores information in flexible “documents” rather than strict tables.

(Source: MongoDB)

This might sound like a small technical detail, but it is a massive quality-of-life improvement for software engineers. It allows them to build applications faster and change them on the fly without breaking the whole system.

Because developers love using it, it has become one of the most popular modern databases in the world.

Their main product is called MongoDB Atlas.

This is a cloud service that manages the database for you. Instead of a company buying servers and hiring a team to keep the database running, they just pay MongoDB a subscription fee to host it for them on the cloud (like Amazon AWS, Google Cloud, or Microsoft Azure).

This is a classic “Software as a Service” (SaaS) business model.

The market is growing rapidly. MongoDB said its market is projected to explode from $65 billion in 2021 to $150 billion in 2028 — a 130% growth in seven years.

(Source: MongoDB)

The company said AI is going to be a tailwind to its business. Why? The more app development there is, the better for MongoDB. Why? They will need MongoDB’s products. Now, AI will reduce the cost of app development, which will lead to many new use cases that will need MongoDB’s flexible, scalable DBs.

(Source: MongoDB)

Most of their revenue comes from these subscriptions, which are often based on consumption, meaning the more an application grows and uses data, the more MongoDB gets paid.

Its operating cash flow is growing rapidly, as MongoDB expects it to grow from $100 million in YTD FY 25 to $326 million this year.

(Source: MongoDB)

Not only that, MongoGB raised its revenue growth guidance from about 17% to 21%. Clearly, the momentum is accelerating. Estimates for EPS skyrocketed from $3.64 to $4.76 for a year-over-year growth of about 30%.

(Source: MongoDB)

Bottom line: Artificial intelligence is clearly a massive driver for MongoDB’s business, and the company kept raising its guidance. Investors must keep an eye on this stock. It is one of the dark horse plays on AI.

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