Microsoft and Meta delivered two very different stories this earnings season, and the AI trade is feeling the whiplash.

Microsoft showed that its massive AI investments are starting to pay off in real revenue. Meta, on the other hand, missed earnings, raised its spending outlook, and watched its stock drop 9%. The contrast is forcing investors to rethink what they want from AI companies—and how they play it through ETFs.

“The market may be shifting from rewarding AI exposure broadly to rewarding companies that can execute and monetize their investments,” said Jake Behan, Head of Capital Markets at Direxion.

Microsoft’s quarter was a masterclass in execution. Intelligent Cloud revenue jumped 32% to $39.3 billion, Azure and other cloud services surged 43%, and total cloud revenue climbed 27% to $59.3 billion. The stock was up 9% in premarket trading and opened 15% higher.

“Microsoft has spent much of the past year being viewed primarily as a major capital spender. This report reminded investors that it is also becoming one of the largest monetizers of AI,” Behan said. “The key question was whether it could shift the conversation from how much it is spending on AI to what it is earning from those investments, and the results suggested meaningful progress.”

For traders who think the momentum continues, the Direxion Daily MSFT Bull 2X Shares (MSFU) offers double the daily return of Microsoft stock. The Direxion Daily MSFT Bear 1X Shares (MSFD) provides inverse exposure. With MSFT up 15% at the open, MSFU surged nearly 28%.

Meta’s story was the opposite. The company reported second-quarter revenue of $60.8 billion, beating estimates of $59.5 billion, but adjusted EPS of $6.18 missed the $7.13 consensus. It also raised the lower end of its 2026 capital expenditure outlook to $130 billion–$145 billion. Shares fell nearly 10% in premarket and more than 9% at the open.

“While much of the attention has focused on Meta cutting its next-quarter sales forecast, the decline in operating margin from 43% to 31% year over year may be more concerning,” said Ryan Lee, SVP of Product and Strategy at Direxion. “AI-driven capital expenditures are clearly weighing on the business. If revenue cannot keep pace with spending, questions will persist about whether Meta can sustainably maintain its position in the AI arms race.”

Lee added, “Although Meta did not follow Google into negative free cash flow, a print below $1 billion is jarring and reflects the cash burn investors have seen quarter after quarter.”

Meta’s selloff pushed the stock near its 52-week low. Traders expecting a rebound might look at the Direxion Daily META Bull 2X Shares (METU), while bears could consider the Direxion Daily META Bear 1X Shares (METD). Income-focused investors may find the recently launched Direxion Meta Defined Income ETF (MEIB) attractive, as it targets a 20% annual distribution rate while allowing participation in any recovery.

Ironically, Meta’s spending could still benefit another corner of the ETF market. Lee noted that “another explosive quarter of capital spending could have ripple effects across the broader AI supply chain, particularly semiconductor companies that have recently fallen into a bear market. Meta may be paying the price, but its continued infrastructure buildout could provide a bullish catalyst elsewhere.”

The earnings underscore a broader shift in the AI trade. For the past two years, investors rewarded companies for announcing ambitious AI spending. Increasingly, however, the market appears to be favoring companies that can demonstrate those investments are translating into sustainable revenue and earnings growth—a transition that could reshape flows across AI, semiconductor, and leveraged single-stock ETFs.