Meta’s revenue for the quarter was $47.52 billion, marking a 22% increase compared to last year and exceeding predictions of $44.8 billion. Earnings per share also beat expectations, coming in at $7.14, up 38% from the anticipated $5.90–$6.00. Ad revenue increased by more than 21%, and user engagement remained strong with 3.48 billion daily active users. Meta has updated its guidance for Q3 revenue to potentially reach $50.5 billion and raised full-year capital expenditure to $72 billion. Following this news, the stock rose by 11.62% to $775.88.

Strong Performance from Microsoft

Microsoft reported strong results as well, with revenue at $76.44 billion, an 18% increase from last year. Its earnings per share rose to $3.65, above the estimated $3.35 and up 24% year-over-year. The demand for Azure, powered by cloud and AI infrastructure, increased by over 30%. For the upcoming fiscal year, Microsoft plans to allocate $120 billion for capital expenditures, up from $88 billion last year. The stock reached a record high of $555.45 during the day but closed at $536, a 4.6% increase. The market cap briefly exceeded $4 trillion, closely following Nvidia. While Meta and Microsoft compete in AI, they have different focuses. Meta is centered on social media and advertising, while Microsoft excels in enterprise software and cloud services. Both are leaders in the AI field without direct competition like Meta versus Google or Microsoft versus Amazon Web Services.

Implied Volatility Decreases

The strong earnings from Meta and Microsoft reinforce the narrative that AI spending is more solid than ever. This is not just hype; it is turning into actual revenue and profits. We have observed a drop in implied volatility, with the VIX recently hitting a 12-month low of 11.5, indicating that traders are confident and not fearing an imminent decline. With Meta’s shares breaking decisively above the $748 resistance level, this support becomes important. We saw a similar breakout pattern in late 2024 that led to a consistent 15% rally in the following month. Selling put spreads for August or September, with a short strike around $740, could be a smart way to earn premiums while betting that this support holds. Microsoft’s breakout above its previous high of $518 is also a strong bullish sign, despite a slight pullback from its peak. The options market confirms this, as call volume for August expiration has surged to over double the daily average, highlighting strong bullish bets. A strategy of selling puts below the new $518 support level appears wise, taking advantage of the rising confidence. The significant capital expenditure announcements are seen as a sign of strength, not a burden on cash flow. The total spending between the two companies is now nearly $200 billion for the year, bolstering the narrative that they are the clear leaders in the field. For derivative traders, this suggests we should see elevated implied volatility around upcoming earnings, opening up opportunities for strategies like straddles if you anticipate significant movements. While the overall trend appears to be upward, we must monitor these key breakout levels closely. If Meta fails to maintain $736 or Microsoft drops below $518, it could indicate that this rally phase is ending. That would be a signal to consider taking profits on bullish positions or initiating short-term bearish strategies. Create your live VT Markets account and start trading now.

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