Sector Spotlight: Meta, Microsoft stand out following respective Q2 results

Welcome to the latest edition of “Sector Spotlight,” where The Fly looks at a new industry every week and highlights its happenings.

MEGACAP NEWS: The U.K.’s CMA has found that Microsoft’s (MSFT) software licensing terms harm competition in the cloud market, and may open a probe into Microsoft and Amazon (AMZN) in 2026. The finding by an independent panel of the Competition and Markets Authority said on Thursday that the U.K. cloud market “is not working well” and recommended the agency impose conduct requirements on Microsoft and Amazon to boost competition. The CMA’s panel found that the cloud market was highly concentrated, with Amazon Web Services and Microsoft’s Azure each commanding up to 40% of UK customer spending, with Google (GOOGL) trailing in third place. “The CMA has said that it will keep under review possible options for further SMS designation investigations, and it anticipates that options will be considered by the CMA Board in early 2026. We expect that our findings and recommendations will be taken into account as part of its decision.”

Top White House officials told a group of rare earths firms last week that they are pursuing a pandemic-era approach to boost U.S. critical minerals production and curb China’s market dominance by guaranteeing a minimum price for their products, five sources familiar with the plan told Reuters, Ernest Scheyder and Jarrett Renshaw reported. The previously unreported July 24 meeting was led by Peter Navarro, President Donald Trump’s trade advisor, and David Copley, a National Security Council official tasked with supply chain strategy. It included ten rare earths companies plus tech giants Apple (AAPL), Microsoft and Corning (GLW), which all rely on a consistent supply of critical minerals to make electronics, the sources said.

The Italian Competition Authority, acting in close cooperation with the competent departments of the European Commission, has decided to launch an investigation into Meta Platforms., Meta Platforms Ireland , WhatsApp Ireland and Facebook Italy – referred to as Meta – over a suspected abuse of dominant position in violation of article 102 of the Treaty on the Functioning of the European Union. As of March 2025, Meta – which holds a dominant position in the market for consumer communications apps – decided to pre-install its artificial intelligence service, named Meta AI, by combining it with its WhatsApp service, without any prior request from users. Furthermore, Meta AI is placed in a prominent position on the screen and integrated into the search bar. By combining Meta AI with WhatsApp, Meta appears capable of channelling its customer base into the emerging market, not through merit-based competition, but by “imposing” the availability of the two distinct services upon users, potentially harming competitors, the ICA says. According to the Authority, there is thus a risk that users may become “locked in” or functionally dependent on Meta AI, not least because, by using the information provided over time, it appears that the responses generated by the service become increasingly useful and relevant.

EARNINGS RECAP: Apple share grew 2% following its second quarter earnings beat. Apple CEO Tim Cook said in the earnings release: “Today Apple is proud to report a June quarter revenue record with double-digit growth in iPhone, Mac and Services and growth around the world, in every geographic segment . At WWDC25, we were excited to introduce a beautiful new software design that extends across all of our platforms, and we announced even more great Apple Intelligence features.” The company added that tariffs will add about $1.1B in costs in Q4. Barclays analyst Tim Long raised the firm’s price target on Apple to $180 from $173 and maintained an Underweight rating on the shares. The company reported a fiscal Q3 beat, driving by higher iPhones and Macs with slightly better Services, the analyst noted. The firm believes demand pull-ins and China subsidies helped the results. It keeps an Underweight rating on Apple’s regulatory, China, and artificial intelligence risk.

On the other hand, Amazon shares were down 6% last night after reporting Q2 results despite beating analyst expectations. Andy Jassy, president and CEO, Amazon, said: “Our conviction that AI will change every customer experience is starting to play out as we’ve expanded Alexa+ to millions of customers, continue to see our shopping agent used by many millions of customers, launched AI models like DeepFleet that optimize productivity paths for our 1M+ robots, made it much easier for software developers to write code with Kiro, launched Strands to make it easier to build AI agents, and released Bedrock AgentCore to enable agents to be operated securely and scalably. Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I’m excited for what lies ahead.” Barclays increased its price target on Amazon.com to $275 from $240 and reiterated an Overweight rating on the shares post the Q2 report. The firm says nearly every line in Amazon’s retail business accelerated in the quarter. While management’s tone around the second half of 2025 “sounds upbeat,” the post-earnings share selloff isn’t surprising after the underperformance versus Azure, the analyst told investors in a research note.

Meta Platform’s stock gained 11% after it surpassed street expectations in Q2. The company noted that 3.4B people are using at least one of its apps each day. Mark Zuckerberg, Meta founder and CEO, said: “We’ve had a strong quarter both in terms of our business and community. I’m excited to build personal superintelligence for everyone in the world.” HSBC upgraded Meta Platforms to Buy from Hold with a price target of $900, up from $610. The company reported strong Q2 results as its artificial intelligence tools and network effect supported double-digit revenue growth, the analyst told investors in a research note. HSBC believes Meta is well positioned to outpace digital advertising market growth. The company’s AI capabilities improve targeting and the quality of content, creating new growth opportunities, contends the firm. It cites higher operational forecasts and a higher valuation multiple for the upgrade.

Microsoft jumped 9% following its second quarter beat. “Cloud and AI is the driving force of business transformation across every industry and sector,” said Satya Nadella, chairman and chief executive officer of Microsoft. “We’re innovating across the tech stack to help customers adapt and grow in this new era, and this year, Azure surpassed $75 billion in revenue, up 34 percent, driven by growth across all workloads.” “We closed out the fiscal year with a strong quarter, highlighted by Microsoft Cloud revenue reaching $46.7 billion, up 27% year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. HSBC upgraded Meta to Buy from Hold with a price target of $900, up from $610. The stock in premarket trading is up 11%, or $77.02, to $772.23. The company reported strong Q2 results as its artificial intelligence tools and network effect supported double-digit revenue growth, the analyst tells investors in a research note. HSBC believes Meta is well positioned to outpace digital advertising market growth. The company’s AI capabilities improve targeting and the quality of content, creating new growth opportunities, contended the firm. It cites higher operational forecasts and a higher valuation multiple for the upgrade.