The Briefing: Google Shows Up Meta

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The Briefing

Oct 29, 2025

The Briefing

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Mark Zuckerberg is doubling down on AI—again. And the cost is mounting. Meta Platforms reported Wednesday that its increased investment in AI, both for hiring star AI researchers and for investing billions in data centers, hurt its operating profit margins and squeezed its free cash flow by one-third in the third quarter. Since the end of last year, Meta's cash balance has fallen 43%. And yet Zuckerberg said Wednesday evening Meta plans to ratchet up spending even more next year to meet persistent internal demand for more AI computing capacity to develop its own AI products. "I think that it's the right strategy to aggressively front-load building capacity so that…we're prepared for the most optimistic cases," he told analysts.

Meta stock fell roughly 8% in after-hours trading, suggesting investors are getting nervous about the company's spending spree. The tone of its report was also a contrast to the September-quarter reports from Google and Microsoft, also out on Wednesday. Those companies—each significantly bigger in revenue terms than Meta—appear to be handling similarly large and increasing AI investments more comfortably. Unlike Meta, both have public cloud businesses that rent AI-powered servers to businesses, particularly AI developers. Both companies say the increases in their investments for capital expenditures are driven by increased demand from customers, whereas Meta's investments are driven by the company's own needs. Meta's return on its AI investment is, in the near term at least, likely to be lower.

Google's performance looked particularly healthy in the latest quarter: Its growth in both search ads and its increasingly important cloud business accelerated from the June quarter. The results will likely calm investor worries about the competitive threat to Google search posed by OpenAI's ChatGPT. And cloud's strength—its operating profits nearly doubled in the quarter—likely also cheered investors. Google's free cash flow leapt 39% in the quarter compared to a year earlier, despite the fact that its capex nearly doubled over that time. Google stock jumped 6% in after-hours trading.

Microsoft had nearly as good a quarter. Its all-important Azure cloud business posted 40% revenue growth in the period, roughly in line with the June quarter and much faster than the growth rate of its nearest rivals, Amazon Web Services and Google Cloud. Microsoft's overall growth rate was also in line with the previous quarter. The company's operations threw off 32% more cash than a year earlier, ensuring that Microsoft could easily afford a meaningful bump in capex to $35 billion, well ahead of the "over $30 billion" the company had projected a few months ago. Microsoft Chief Financial Officer Amy Hood said the company's capex would grow faster in fiscal 2026 than it did last year.

We'll have to wait until Thursday evening, when Amazon reports earnings, to get a more complete picture of how big tech is handling the AI race. But right now, the risks for Meta of trying to keep up with other big-spending rivals appears to be growing. More on the earnings results here, here and here.

Fiserv's Collapse

You may not have heard of Fiserv, but that's likely to change after today. Fiserv has long been one of the least-sexy companies around, handling payments processing for banks and established bricks-and-mortar merchants. It has faced growing competition from the flashier and newer digital payments processors such as Stripe that are serving the growing crop of online merchants.

Even so, Fiserv had managed to post 7% to 9% annual growth in recent years, a marked improvement on its growth rate between 2014 and 2018. That looked good for Frank Bisignano, CEO between 2020 and May of this year, when he jumped to the Trump administration as head of the Social Security Administration.

But Bisignano's track record is looking a little tattered now. On Wednesday, Fiserv's new CEO, Michael Lyons, slashed the company's growth forecast for this year by more than half and revealed that much of the previous growth was fueled by growth in its Argentinian operation, which has now slowed sharply, as well as short-term revenue initiatives. Lyons said Fiserv had put too much emphasis on short-term results rather than longer-term goals that generate high recurring revenue.

Lyons said that the company's previous growth target included assumptions for "outsized business volume growth, record sales activity and broad-based productivity improvements, all of which would have been objectively difficult to achieve." Uh-oh.

Wall Street analysts were pissed, to put it mildly. William Blair analysts wrote in a report the results were "shocking" and that the stock was now "broken." Indeed, Fiserv stock plunged 42%. More news is to come, we're sure.

Snowflake Executive's Blooper

A Snowflake executive just learned the hazards of talking to a social media influencer. A few days ago, Mike Gannon, who joined the data analytics provider in March as chief revenue officer, was interviewed on the street outside the New York Stock Exchange by an influencer with the Instagram handle Theschoolofhardknockz. During the interview, Gannon revealed that Snowflake was going to finish the current fiscal year with "probably $4.5 billion" in revenue and would be at "$10 billion in a couple of years."

On Monday, Snowflake filed with the Securities and Exchange Commission to acknowledge that an unnamed "executive officer…made certain statements regarding the company's future results" to the Instagrammer but that this officer was "not a designated spokesperson authorized to disclose financial information on behalf of the company. As a result investors should not rely upon such statements," Snowflake said, reaffirming its guidance from late August.

What the company was reacting to was presumably the $10 billion forecast, as Gannon's comments for this year were in line with what Snowflake forecast in August. Nevertheless, investors seem to like his remarks. Snowflake stock jumped 3% on Monday to $265.97 and has risen steadily since then despite the company's warning.

In Other News

Enterprise software firm ServiceNow lifted revenue 21.5% in the third quarter, sticking to the low 20% range of the growth it typically generates. The company also reported 17.5% growth in free cash flow to $592 million.
Nvidia's market capitalization passed $5 trillion on Wednesday, about $1 trillion more than the next most valuable company, the latest testament to the chipmaker's strong position in the AI sector.
YouTube announced a "voluntary exit program" allowing eligible employees in the U.S. to leave the company with severance, Neal Mohan said in a memo to employees on Wednesday.
Italian tech conglomerate Bending Spoons struck a deal to buy once-powerful internet powerhouse AOL from Apollo-owned Yahoo, adding to a recent spate of purchases by the company of faded U.S. tech firms.
Etsy said Wednesday that CEO Josh Silverman will become executive chair of the online marketplace's board as the company tries to revamp itself amid continually declining sales. He will be replaced as CEO by Kruti Patel Goyal, a longtime Etsy executive who was previously its president and chief growth officer.

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