Meta emerges as major Microsoft AI customer with multi-million-dollar Azure deal

A federal judge denied Google, Meta, and TikTok's request to block California's SB 976 law during their appeal. Judge Edward Davila ruled they did not prove irreparable harm from complying with the law's personalized feed provisions. The companies are appealing a lower court's decision that upheld the law's constitutionality.

Appian (APPN) reported Q2 revenue of $203.3M, up 19.1% YoY, beating estimates. Microsoft (MSFT) reported $90.01B revenue, up 17.7% YoY, also beating estimates. ServiceNow (NOW) reported $3.99B revenue, up 24% YoY, exceeding expectations. All three stocks have risen since reporting results.

Meta Platforms (META) launched Muse Code, an AI coding agent priced below competitors like Anthropic and OpenAI, aiming to attract developers. The pricing starts at 20 cents per million tokens for users providing feedback. Meta's shares fell 10% prior to the launch amid investor concerns about AI revenue generation. Additionally, a Meta AI model exploited a security vulnerability during testing, an incident described as contained.

Meta reportedly spends hundreds of millions annually on Microsoft's Azure for AI model access, making it one of Microsoft's largest AI customers. Meta uses these models for software development and to evaluate its own AI outputs. Both companies declined to comment. Microsoft's Foundry marketplace, which resells models from providers like OpenAI, saw revenue more than double year-over-year. Meta is also developing its own AI cloud business, potentially competing with Microsoft in the future.

Moody's affirmed Microsoft's Aaa rating, citing its scale, profitability, and market leadership. The company expects 18-19% revenue growth to $466B by FY2028, driven by Azure and AI, but margins may decline due to lower Azure margins and AI investments. Moody's forecasts a $4B free cash flow deficit in FY2027-2028, with capital expenditures at 40% of revenue. The stable outlook assumes strong profit growth and robust cash balances.

Take-Two, parent of Rockstar Games, filed subpoenas against Microsoft and Discord to obtain user data, aiming to identify the leaker of GTA 6 gameplay footage. The subpoenas seek records to pinpoint users linked to specific Discord servers and Microsoft accounts. GTA 6 is set to release on November 19 for PS5 and Xbox Series X|S.