Ad Empires in the AI Crosshairs: Meta’s Massive Infra Spending vs. Google’s Search Defense

Meta Platforms (NASDAQ:META | META Price Prediction) and Alphabet (NASDAQ:GOOGL) both missed EPS estimates this month. In both cases, the miss came from items outside their ad businesses. Meta took a $9.89B legal charge. Alphabet recorded an $8.70B equity securities loss. Underneath those charges, both ad businesses grew quickly while AI capex jumped and free cash flow turned negative.

Ad Pricing Carries Meta While Cloud Carries Alphabet

Meta’s revenue rose 26.1% to $64.60B. Average price per ad climbed 14%, as advertisers paid more per ad. Nearly 10 million advertisers used a generative AI creative tool. Without the legal charge, operating income would have risen 11%. That is a healthy core hidden by a messy headline.

Alphabet’s highlight was Google Cloud, where revenue rose 103% to $30.71B. Search still matters too. Sundar Pichai said “our year-over-year query growth rate is the highest it’s been in the last five years.” That answers the worry that AI chatbots would hollow out Search, at least for now.

Consumer Superintelligence Meets Full-Stack Selling

Meta is building toward Muse, its personal AI agent. More than 10 million people in the U.S. and Canada set it up in about six weeks, and more than 25% of weekly users shop through it. Those are strong early numbers. Muse is also expensive to serve. Mark Zuckerberg admitted it is “very compute-intensive to run” and is aiming for a more than 10x gain in efficiency within a year. To help fund the expansion, Meta plans a new nonvoting share class, which works out to an effective 2-for-1 stock split.

Alphabet sells its infrastructure to outside customers. Pichai pointed to “strong demand for our TPU systems across a wide range of customers.” It is still raising cash, though: $28.7B in notes plus at-the-market stock sales, which means dilution.

Muse Costs and TPU Demand Will Decide 2027

I will be watching whether Meta can turn Muse into commerce fees and subscriptions before its $135-145B 2026 capex plan, plus whatever comes next, weighs further on cash (the power, cooling, and networking suppliers behind that expansion are the subject of a free report on seven AI infrastructure stocks that aren’t chipmakers). More youth-related trials are also on the calendar.

You should keep an eye on Alphabet’s spending as well. It held its 2026 capex outlook steady but expects a significant increase in 2027. Its shared AI research loss grew to $7,655 million from $4,467 million.

Why I Lean Toward Alphabet’s Paying Customers

Meta shares have fallen 12.19% in the week since earnings. That drop followed the earnings report. Even so, Alphabet’s spending has a cleaner revenue base. Its spending is supported by Cloud customers paying for capacity today, and it trades at a P/E near 14 versus Meta’s 22. Meta’s case rests on Muse becoming a commerce platform. My view could shift if Muse revenue shows up clearly in 2027 and the legal uncertainty passes.

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