After Google's $70 billion share buyback announcement and its robust earnings beat, optimism is swirling around whether its fellow Magnificent Seven members — $Meta Platforms, Inc.(META)$ and Microsoft — can continue the momentum. Both companies, while operating in distinct parts of the tech universe, are showing signs that they might just rise to the occasion.
Riding the digital currents of optimism and innovation together
Setting the Stage: Post-Google Glow
Google’s impressive results were not just about beating earnings forecasts — they underscored broader resilience in digital advertising and corporate tech spending, two areas many feared were under threat. For investors, the natural question is whether this rising tide can lift other large-cap boats, or whether Google's performance was simply company-specific. Meta and Microsoft stand out as two companies uniquely positioned to benefit from the same tailwinds, but each is pursuing growth through very different levers.
Meta: More Than Just Ads
Meta has navigated the digital advertising rebound with remarkable skill, benefiting from the healthier-than-expected ad ecosystem that buoyed Google's results. Advertising revenue, which still represents the lion’s share of Meta’s business, has rebounded sharply — but what’s equally impressive is how Meta has quietly pulled off a broader operational transformation.
Since late 2022, Meta has cut its headcount by roughly 21%, embracing a "year of efficiency" mantra that pushed operating margins from 20% to over 30% in a little more than a year. This sharper focus on profitability without sacrificing innovation has not gone unnoticed by investors.
Meanwhile, Meta’s deployment of artificial intelligence across its core platforms — Facebook, Instagram, and WhatsApp — is beginning to pay dividends in a subtle but powerful way. Enhanced ad targeting, smarter content recommendations, and improved Reels monetisation have helped lift revenue per user by 11% year-over-year as of Q4 2023, outpacing many rivals. Reels, once seen as a defensive move against TikTok, is now a bona fide revenue engine, generating an annual run-rate of over $10 billion.
Yet challenges remain. Reality Labs continues to burn billions in pursuit of the metaverse vision, keeping pressure on near-term margins. While investors appear willing to tolerate this for now, ongoing losses in this segment could resurface as a concern if broader market sentiment shifts.
Microsoft: A Different Engine of Growth
$Microsoft(MSFT)$ approaches the opportunity from a different angle: broad-based, diversified strength. Its ecosystem spans cloud computing (Azure), software (Office, Windows), gaming (Xbox), and professional networking (LinkedIn), creating multiple revenue streams that insulate it from sector-specific shocks.
Azure remains a star performer, growing 31% year-over-year last quarter and beating analyst expectations. Importantly, Azure’s growth is not just about raw capacity expansion — it’s increasingly about embedding artificial intelligence services directly into cloud offerings, boosting margins and deepening client relationships.
One area gathering serious momentum is Microsoft’s AI-driven productivity tools. Copilot, the generative AI assistant integrated into Microsoft 365, is now being trialled by around 35% of Fortune 500 companies, up from just 15% six months ago. Early feedback suggests that Copilot’s productivity enhancements — reducing tasks like summarising emails or drafting documents — are starting to move from novelty to necessity for large enterprises.
If even a fraction of these trials convert into full deployments, Microsoft could unlock a powerful new revenue stream that complements its already robust commercial cloud business, which is now running at over $100 billion in annualised revenue.
Mag 7: Growing the Gap
The broader backdrop adds further intrigue. S&P 500 companies excluding the Magnificent Seven are projected to deliver modest 4–5% revenue growth in 2024. In contrast, Google, Meta, and Microsoft are expected to post revenue growth of 11%, 18%, and 14% respectively.
This divergence in fundamental growth rates is becoming harder for investors to ignore. The Mag 7 are no longer just large — they are growing meaningfully faster than the broader market, reinforcing their gravitational pull on indices and asset flows alike.
2024 revenue growth: Tech leaders versus the broader market.
Risks Linger, But Strength Prevails
Of course, no story is without its risks. The Magnificent Seven now account for roughly 30% of the S&P 500’s total market capitalisation, heightening concerns about market concentration. Regulatory scrutiny also remains a slow-moving but persistent threat. While recent actions have yet to materially impair Big Tech’s profitability, the landscape could shift quickly if new rules around competition or AI governance emerge.
Additionally, elevated valuations leave little room for error. Any disappointment, even minor, could trigger sharp corrections — especially in a market environment that has grown increasingly momentum-driven.
Leaders rising above the market’s shifting geometric foundations
Cautious Optimism Still Warranted
All things considered, cautious optimism seems the most rational stance. Meta’s revitalised advertising machine and newfound operational discipline, paired with Microsoft’s accelerating AI adoption and diversified growth engines, suggest both companies are well-positioned to deliver respectable — if not spectacular — results.
While it would be unrealistic to expect $Alphabet(GOOGL)$-style blowouts from both, their strategic strengths and improving fundamentals indicate they’re more likely to ride Google's coattails than stumble behind. Selective strength among the Magnificent Seven looks set to continue — at least for now.
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