Meta’s revenue for the quarter reached $47.52 billion, a 22% increase from the previous year, surpassing expectations of $44.8 billion. Earnings per share also exceeded forecasts significantly, arriving at $7.14, a 38% rise against expected estimates of $5.90–$6.00.

Ad revenue rose by over 21%, with user growth maintaining at 3.48 billion daily active users. Meta revised its Q3 revenue guidance to potentially $50.5 billion and increased its full-year capital expenditure to $72 billion. The stock climbed by 11.62% to $775.88.

strong performance from microsoft

Microsoft also delivered strong results, with revenue of $76.44 billion, an 18% rise from the previous year, and EPS of $3.65, above the estimated $3.35 and 24% higher year-over-year. Demand for Azure, boosted by cloud and AI infrastructure, surged over 30%.

For the upcoming fiscal year, Microsoft plans $120 billion in capital expenditure, up from $88 billion last year. Microsoft’s stock broke records, reaching an intraday high of $555.45 but closing at $536, up 4.6%. The market capitalization briefly surpassed $4 trillion, closely following Nvidia.

Meta and Microsoft, while competitors in AI, maintain different strengths; Meta focuses on social media and advertising, while Microsoft dominates enterprise software and cloud services. They lead the AI sector but do not directly compete like Meta and Google or Microsoft and Amazon Web Services.

implied volatility decreases

The massive earnings beats from both Meta and Microsoft confirm the AI spending narrative is stronger than ever. This isn’t just hype; it’s translating directly into revenue and profits. We’re seeing implied volatility drop, with the VIX recently touching a 12-month low of 11.5, suggesting traders are confident and not fearing an immediate downturn.

With Meta shares decisively breaking the $748 resistance, that level now becomes a critical floor for us. We saw a similar breakout pattern back in late 2024 that led to a sustained 15% rally over the following month. Selling August or September put spreads with a short strike around $740 could be a way to collect premium while betting that this new support holds.

Microsoft’s breakout above its previous $518 high is a major bullish signal, even with the slight pullback from the session peak. We’re seeing this confirmed in the options market, where call volume for the August expiration has surged to over twice the daily average, indicating strong upside bets. A similar strategy of selling puts below the new $518 support level seems prudent, capitalizing on the heightened confidence.

The huge CapEx announcements are being treated as a sign of strength, not a drag on cash flow. This massive spending, now totaling nearly $200 billion between them for the year, fuels the narrative that they are the undisputed leaders. For derivative traders, this means we can likely expect elevated implied volatility around future earnings dates, presenting opportunities for strategies like straddles if you anticipate big moves.

While the path of least resistance is clearly upward, we must watch those key breakout levels closely. A failure for Meta to hold $736 or for Microsoft to stay above $518 would be the first sign that this leg of the rally is exhausted. This would be our cue to consider taking profits on bullish positions or even initiating small, short-term bearish plays.

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