The popular business software giant and parent company of Facebook and Instagram released its results for the quarter ended in September on Wednesday evening. Both posted fairly strong revenue growth and even stronger improvements in operating profit for the quarter, each beating Wall Street’s targets for the period.

Still, both stocks fell about 3% after hours, following their respective reports and conference calls. Both issued December quarter revenue forecasts that were barely in line with, or slightly below, analysts’ targets. And both said the runaway capex spending that fueled their race into AI services would continue in the current quarter, with Meta giving strong signals that next year would bring even more.

Alphabet’s Google and Amazon.com are in the same race. But the recent spending trend at Microsoft and Meta stands out more compared to their historical trends. The $53 billion that Microsoft has already spent this calendar year represents about 28% of the company’s revenue for this period, well above the 12% of revenue that Microsoft has in average in investment spending for the years 2014-2023. Meta said it plans to spend between $38 billion and $40 billion on investments this year, which would represent about 24% of Wall Street’s projected revenue for the year. The company has spent on average around 19% of its revenue on investments over the past 10 years.

Providing generative AI services is not cheap, considering the computing power involved. Edge data centers aren’t growing quickly either, especially since some of Nvidia’s newer systems require liquid cooling that must also be integrated. Therefore, the AI ​​sector requires spending a lot of money before (hopefully) much more comes back. “You have to build to meet demand,” Amy Hood, Microsoft’s chief financial officer, said during her company’s conference call Wednesday.

Is the demand there? Microsoft said yes. Hood said generative AI services contributed about 12 percentage points to the 33% year-over-year growth of the company’s Azure cloud computing service in the recent period. . And at Meta, Mark Zuckerberg said during his call Wednesday that the generative AI tools deployed by the company increase the time users spend on Facebook and Instagram and help advertisers create more effective campaigns that increase rates conversion rate of 7%.

However, these partial disclosures, which fail to make explicit the amount of revenue generated by AI, are difficult for investors to assess. And assessing the ROI of these companies may not get easier anytime soon, especially if expenses continue to skyrocket. Zuckerberg said Wednesday that “our investments in AI continue to require serious infrastructure, and I plan to continue to invest in it significantly” as he discussed plans for next year.

That could dampen some of the enthusiasm for Meta stock, which had surged 67% so far this year before Wednesday’s results. Microsoft performed much more modestly for the year, up just 15% from the last report. Investors applauded the potential of AI last year, but are growing weary of the huge sums being spent. Showing a clearer ROI should be high on big tech’s list of resolutions for the new year.

Write to Dan Gallagher at [email protected]