Earnings Reports Show How Big Tech Companies Are Quietly Experiencing a Digital Advertising Boom

As the tech giants increase their already impressive spending on artificial intelligence, their respective digital advertising businesses have also gained momentum.

This week’s quarterly earnings reports Goal, Amazon, Alphabet and microsoft all showed healthy revenues on the advertising front.

Rising online advertising sales have allayed concerns earlier this year that economic turmoil, amplified by President Donald Trump’s trade policies, would negatively impact advertising budgets.

“I think the digital advertising market is strong,” said Jasmine Enberg, co-founder of Scalable, a creative economy media company. “I think this economic instability and volatility is already priced in for a lot of people right now; it more or less seems to be the status quo.”

Meta outperformed its rivals during the quarter with the fastest growth in advertising-related sales.

The company’s total revenue in the third quarter, of which 98% is derived from online ads, increased 26% year over year to $51.24 billion, the company’s highest sales since the first quarter of 2024.

Revenue at Amazon’s online advertising unit soared 24% year over year to $17.7 billion, a faster growth rate than the company’s AWS cloud computing unit, whose sales rose 20%.

CEO Andy Jassy highlighted on Amazon’s earnings call that the company continues to expand its demand-side platform from targeted ads to more third-party apps and sites.

“If you look at some of the partnerships we’ve made, the partnership with Roku gives us the largest connected TV footprint in the U.S.,” Jassy said. “And add to that what we’ve done recently by giving our DSP customers the opportunity to integrate with ad inventory on Netflix, Spotify and SiriusXM, and it’s powerful.”

Alphabet’s total advertising sales for the third quarter reached $74.18 billion, an increase of 13% from $65.85 billion a year ago. YouTube’s online advertising sales in the third quarter increased 15% to $10.26 billion.

Microsoft’s news search and advertising unit brought in $3.7 billion in the company’s fiscal first quarter, a 14% increase from the $3.2 billion it posted a year earlier.

Even if there has been some reduction in advertising budgets due to economic uncertainty, companies have likely shifted some of that spending from traditional businesses like newspapers to digital advertising platforms, said Jeremy Goldman, senior director of content at Emarketer.

“I think what might be happening is a no-brainer,” Goldman said. “Invest your money in social media, invest your money in retail media, and invest your money in search advertising.”

It wasn’t just the megacaps that showed strong online advertising growth this week.

Reddit on Thursday reported a 68% increase in third-quarter sales, beating analyst estimates. The company said global daily unique assets grew 19% year over year to 116 million, beating estimates of 114 million.

Break and Pinterest They are scheduled to report the results next week.

Making big strides in AI

All of the tech giants made it clear that they see no broader economic concerns that would justify a reduction in their AI spending and instead raised their guidance for capital spending, despite concerns of a bubble.

Alphabet, Meta, Amazon and Microsoft collectively expect capital spending in excess of $380 billion this year, which is still a fraction of the $1 trillion in data center and cloud computing deals that OpenAI has recently announced with partners such as Nvidia, Oracle and Broadcom.

But while investors applauded Amazon and Google, they were less enthusiastic about Microsoft, and especially Meta.

Shares of Facebook parent plunged 11% on Thursday after the company said it would raise the low end of its capital spending guidance to between $70 billion and $72 billion from the previous range of $66 billion to $72 billion.

Analysts at Oppenheimer downgraded Meta’s stock to the equivalent of hold from buy, because they said it’s less obvious how the social media company will benefit from its AI investments compared to its big tech rivals that also operate cloud computing services.

“Significant investment in Superintelligence despite unknown revenue opportunities mirrors 2021/2022 Metaverse spending,” Oppenheimer analysts wrote, contrasting the company’s large AI spending related to its Superintelligence Labs with its money-losing Reality Labs division, which makes virtual reality and augmented reality technologies.

Susan Li, Meta’s chief financial officer, said Wednesday during a follow-up earnings call that it’s important for the company to invest in AI-related data centers and third-party cloud computing services or risk being left behind, echoing similar comments made by CEO Mark Zuckerberg.

“The top priority for the company is to invest our resources to position ourselves as a leader in AI,” Li said. “That means I think that during the immediate period ahead, we could see some financial pressure during which our operating profit could be patchy.”

Meta has continued to point out how its investments in AI are improving its online advertising business, but is having a harder time showing how that spending will benefit the company in the future, Enberg said.

“I think part of that is we’ve heard the story quarter after quarter that you’re able to integrate AI into your advertising business and use it as an engine for growth,” Enberg said. “What comes next is harder to articulate and much less tangible for investors and others following the space.”

Still, Meta is seeing some growth in new products like the Meta AI app that contains the short video service powered by Vibes AI, Goldman said.

The company may also expand further into subscriptions or even potentially offer enterprise AI services to sell to corporations, which is “an area they haven’t played in at all,” he said.

For now, Meta’s digital advertising unit remains its core business and, as in previous quarters, it’s unclear how the economy will affect advertising budgets.

With the holiday season approaching, all eyes will be on whether lingering economic concerns or tariff-related price increases lead consumers to reduce spending, which could impact corporate marketing campaigns.

“The next test will be when we get to the Black Friday numbers,” Goldman said. “Will they fall short of expectations?”

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