Why Big Tech’s Fundamentals Still Matter More Than the Headlines

Markets have a habit of moving faster than reality can keep up with. Recent weeks have offered a clear reminder of this, as shifting trade policy and renewed political uncertainty have unsettled investor sentiment and triggered a broader market correction. Yet beneath the noise of daily headlines, the underlying performance of some of the world’s largest companies tells a very different story — one of resilience, acceleration, and disciplined execution.

At NEBA Financial Solutions, we believe that short-term volatility should never be confused with long-term value. The latest earnings season from the technology sector reinforces this view, showing that fundamentals — not speculation — continue to drive durable business performance.

Microsoft: Strength the Market Overlooked

A quick read of Microsoft’s latest quarterly numbers tells one story: Azure landed at 31% year-over-year growth, just under the 31–32% guidance the company had set, and that small shortfall became the headline. Look past it, though, and the picture changes considerably. Commercial bookings — the deals signed but not yet recognised as revenue — more than tripled their growth rate quarter-on-quarter, jumping from 23% to 75%. Multi-year infrastructure commitments, including one from OpenAI, played a large part in that shift.

There’s a second number worth sitting with: remaining performance obligations, essentially Microsoft’s backlog of contracted future revenue, climbed 36% year-over-year to reach $298 billion. Numbers like this rarely move markets in the moment, but they tend to be a far better predictor of where a business is heading than any single quarter’s top line.

Alphabet: Undervalued Despite Structural Strength

Cloud is where the Alphabet debate tends to concentrate, and the latest number — 30% year-over-year growth for Google Cloud, down from 35% the prior quarter — looks like deceleration on the surface. Dig into the cause, though, and it’s a capacity story rather than a demand story: the same infrastructure bottleneck showing up across every major cloud provider right now, with new data centre capacity expected to relieve the constraint through 2025.

The rest of Alphabet’s business tells a steadier story. Overall sales climbed 12%, margins widened by 500 basis points year-over-year to 32%, and Search — still the core of the business — grew revenue by 13%, helped along by AI Overviews adding rather than subtracting from user engagement.

Then there’s Waymo, easy to overlook inside a company this size but growing at a pace worth noting. California Public Utilities Commission data shows San Francisco rides went from roughly 12,000 in August 2023 to over 270,000 by August 2024 — a twentyfold jump in twelve months, from the only fully driverless robotaxi operation currently running in the US.

Put it all together — an $85 billion net cash pile, tens of billions in annual free cash flow, dominant search share, and a growing bench of “other bets” like Waymo — and Alphabet still trades at a discount to the S&P 500. That gap looks less like a fair price and more like the market not yet giving the business credit for what it actually has.

Meta: A Case Study in AI-Driven Efficiency

Meta’s recent results illustrate how artificial intelligence is reshaping not just growth, but profitability. Total revenue rose 21% year-over-year to $48.4 billion, with advertising — the core of the business — contributing $46.8 billion of that, also up 21%. Operating margins expanded by 700 basis points to 48% — a substantial improvement that came despite heavy investment in AI infrastructure.

The gains are being felt across the advertising business in particular, where improved targeting and content recommendation have lifted average revenue per user by 16%. Adoption of Meta’s generative AI advertising tools has also accelerated sharply, with more than 4 million advertisers now using them — a fourfold increase in just six months. This has helped push operating margins within Meta’s Family of Apps segment to around 60%.

Efficiency gains extend beyond advertising. Meta’s investment in proprietary large language models and custom AI chips is reinforcing its competitive position while lowering long-term costs, supporting a broader restructuring effort that has included a 5% reduction in workforce. The result is visible in productivity metrics: revenue per employee, which averaged $1.66 million between 2018 and 2021 before dipping to $1.39 million in 2022, has since climbed to $1.91 million in 2023 and $2.29 million in 2024.

The Bigger Picture

Taken together, these results reinforce a broader theme: artificial intelligence is no longer a speculative narrative but a measurable driver of revenue, margin expansion, and competitive advantage across some of the world’s most closely watched businesses. The strongest performers are those translating AI investment into tangible efficiency gains and deepening their competitive moats, rather than simply increasing spend.

Periods of volatility, while uncomfortable, often present the clearest opportunities for long-term investors to assess where genuine value lies. Companies with strong balance sheets, expanding margins and clear technological advantages tend to be the ones best placed to compound value over time, regardless of short-term market sentiment.

For investors looking to gain exposure to this kind of AI-driven growth without picking individual stocks, TEAM’s UCITS funds offer diversified access to global equities positioned around these themes, managed with the same focus on fundamentals over speculation described above.

At NEBA Financial Solutions we continue to monitor these developments closely, helping our clients navigate market volatility with a focus on fundamentals, quality, and long-term positioning. To find out more about how our fund range can help you gain exposure to these trends, get in touch with our team today.

This article is based on insights and analysis provided by TEAM.