The options market has priced a move worth about $190 billion in Microsoft’s market value for Wednesday evening, the largest single-company earnings swing on record. Reuters, citing data from Option Research & Technology Services, reported that the pricing implies a move of about 6.6% in either direction after Microsoft reports fiscal fourth-quarter results, against an average implied move of 4.8% and an average actual move of 4.4% over the last 12 earnings cycles. Meta, which reports the same evening, carries an implied move of 7.8%, slightly above its 7.3% average.
The size of the number says something about what is at stake. Microsoft and Meta are reporting in the same window as the rest of the mega-cap technology cohort, and the results will be read as a verdict on the most expensive bet in corporate history: the hundreds of billions of dollars the largest companies are pouring into AI infrastructure. Investors who rode the AI rally into this year are growing wary of ever-rising costs, and both companies are expected to post capital spending numbers that keep climbing. The same fear has already hit the memory complex, where SK Hynix’s record profit was met with a record selloff in Korean equities the same morning.
Barron’s laid out three questions for Microsoft. The first is the commercialization of its AI Copilot products, which have generated enormous usage claims and modest disclosed revenue. The second is the growth rate of Azure, and specifically whether it is closing the gap with Google Cloud, which has been growing faster and taking share in the AI workloads that matter. The third is the pressure of roughly $20 billion in quarterly data center spending on margins, a figure that has grown large enough to change the shape of the income statement even for a company of Microsoft’s size.
For Meta, the focus is on the core business and the money-losing parts. Investors want to see Reels advertising revenue growing at a pace that justifies the company’s bets on short-form video, and they want to know how much AI-driven ad targeting has improved efficiency. On the other side of the ledger, the Reality Labs division, home to the VR and AR efforts, is expected to post another quarter of heavy losses, and the company’s expanded infrastructure spending has raised the same question that dogs Microsoft: when do the returns arrive? Matthew Smart, chief investment officer of WWM Investments, told Reuters that investors will focus on the strength of Meta’s core advertising business, the impact of AI on engagement and advertising efficiency, and whether returns from expanding infrastructure can justify the level of spending.
The options market’s own math suggests this is not a routine report. Matt Amberson, founder of ORATS, told Reuters that earnings-related volatility has increased over the past year, with particularly large reactions in the last three quarters. Traders have also positioned for the broader sector: investors bought roughly 100,000 call options on the iShares Expanded Tech-Software Sector exchange-traded fund ahead of the reports, a bet on software strength that doubles as a hedge against disappointment in the two megacaps.
The two companies embody opposite answers to the AI spending question. Microsoft is spending to defend its position, with data center outlays that have become the largest single line of its capital budget. Meta is spending to build one, converting its advertising profits into compute capacity at a pace that rivals the hyperscalers. If both stocks move against their reports Wednesday, the message will be that the market no longer accepts the premise that AI spending automatically deserves a premium multiple.
The spending numbers have reached a scale that forces the debate into the open. Microsoft’s data center outlays have grown quarter after quarter as it builds the capacity to serve OpenAI and its own AI products, and its capital spending now rivals the largest infrastructure builders in the world. Meta’s guidance has moved the same direction, with the company converting much of its advertising cash flow directly into compute. Neither company has given investors a date when the spending curve flattens, and the absence of that date is part of why options traders are demanding so much room for Wednesday’s move.
The session also carries index-level stakes. Microsoft and Meta are among the largest weights in the S&P 500, and a 6.6% move in one and a 7.8% move in the other on the same night would shift the benchmark by more than any single earnings day in recent memory. The reports also land days before the Federal Reserve’s next policy meeting, and options activity around the software sector has been unusually heavy as traders position for both events at once.
For investors, the question underneath the volatility is simpler than the models suggest: have the billions delivered anything yet? Microsoft’s answer will be in Azure growth and Copilot revenue; Meta’s will be in ad prices and Reality Labs losses. The options market has already priced in that the answers will be extreme. Wednesday night will show which direction.
