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Meta reported June-quarter sales above estimates and offered a stronger-than-expected revenue forecast for the current quarter, as artificial intelligence (AI) continues to power its core advertising business. Microsoft, meanwhile, forecast a record USD 30bn in capital spending for the current quarter as its cloud business grew faster than analysts had expected. Shares of both companies jumped in late trading on Wednesday, while Nasdaq futures are up 1.4% ahead of the US market open on Thursday, with S&P 500 futures pointing to a 1% gain.

This latest set of results added to a tech reporting season in which more companies have surpassed expectations than fallen short, with currency-related tailwinds playing a role in driving strong headline beats.

Without taking any single-company views, recent earnings are in line with our positive view on the structural growth of AI. We have raised our capital spending forecast for this year and next, and expect global tech earnings to grow 15% in 2025, up from our previous estimate of 12%.

AI capital spending could reach USD 500bn in 2026. Microsoft’s USD 30bn capital spending plan for the September quarter would represent a step up from the USD 20bn on average over the past six quarters. This came after Alphabet added USD 10bn to its 2025 capex guidance last week due to “strong and growing demand” for its cloud services. With no signs of an AI capex slowdown so far, we now expect global AI spending to hit USD 375bn this year, up 67% from the 2024 level. For 2026, we anticipate another 33% growth to USD 500bn.

Earnings look set to be supported by this robust capital spending and a weaker US dollar. Alongside the depreciation of the US dollar this year, we believe the strong AI capex trends will continue to support profit growth in the tech sector. Semiconductors should remain the fastest-growing segment despite a deceleration from the 2024 pace, and we expect the defensive software and internet industries to maintain their steady low- to mid-teen growth. Overall, we now expect global tech earnings per share growth to hit 15% this year, with another 12.5% increase in 2026.

Encouraging monetization trends are also positive for tech earnings. While tech revenues still lag the strong capex growth, AI monetization continues to show signs of improvement. Cloud revenues of the three largest platforms posted strong growth of more than 25% year over year, with Microsoft reporting a 39% sales growth for its cloud computing unit Azure. Chief Financial Officer Amy Hood also said that the company’s spending is correlated to “basically contracted, on-the-books business.” With AI adoption rates on the rise, we expect monetization to pick up further.

However, while we maintain our confidence in the medium to long-term potential of AI, cyclical risks around margins and supply chain adjustments should become more apparent in the near term, especially with tech valuations at multi-quarter highs. Tariffs on semiconductors also remain uncertain. We maintain a balanced exposure across the AI value chain and recommend investors rebalance some of their AI positions in favor of laggards. Investors can also consider structured investments during periods of volatility, including capital preservation and put-writing strategies.

For more details, read our latest blog: Rich valuations, but richer growth – raising tech EPS