Microsoft and Meta Report Tonight — Options Are Still Pricing In Alphabet's Capex Scare

Microsoft and Meta both report earnings after today's close — the same afternoon the Federal Reserve announces its latest rate decision. It's a lot of news for one Wednesday. But the number options traders are watching closest isn't the Fed's target rate. It's capital expenditures, or "capex" — the money companies spend building things like data centers and servers — because six days ago, that single line item cost Alphabet nearly 7% of its market value in a single session.

The Template Everyone's Watching: Alphabet's July 23 Reaction

On July 23, Alphabet reported a Q2 revenue beat, then watched its stock fall anyway after raising its full-year 2026 capex guidance to a range of $195–205 billion, up from a prior $180–190 billion range. Quarterly capex had roughly doubled year-over-year to around $45 billion, pushing free cash flow negative for the first time since Alphabet went public. Alphabet's CFO said the company still expects capex to "increase significantly" again in 2027.

Investors didn't punish Alphabet for weak results — they punished it for spending more than expected on AI infrastructure with no clear near-term payoff attached. That reaction is the lens Wall Street is now applying to every other hyperscaler's — the large cloud and AI-infrastructure companies' — earnings this week, starting tonight.

What's Being Modeled for Microsoft

Analyst estimates ahead of tonight's fiscal Q4 2026 report cluster around $86.7–87.8 billion in revenue (roughly 13–15% year-over-year growth) and adjusted earnings per share (EPS) in the neighborhood of $4.21–4.24, versus $3.65 a year ago. Microsoft's own guidance points to Azure cloud-revenue growth of 39–40% at constant currency (which strips out the effect of exchange-rate swings) — the figure investors will check most closely as a sign of whether AI spending is translating into cloud demand.

On its prior earnings call, Microsoft's CFO had guided to roughly $190 billion in calendar-2026 capital spending, partly citing higher memory-chip costs. Some analysts are separately modeling capex growth in the 20–30% range for the coming fiscal year — a figure that doesn't cleanly line up with that prior guidance. It's a reminder that "expected capex" numbers floating around before a print often mix different time periods and shouldn't be treated as confirmed until the company says them out loud tonight.

What's Being Modeled for Meta

Meta's own guidance ahead of tonight's Q2 report pointed to total revenue between $58–61 billion, with Wall Street consensus clustering near $60 billion (roughly 27% year-over-year growth) and adjusted EPS estimates in the $7.13–7.23 range. Meta already raised its full-year 2026 capex guidance once this year, from $115–135 billion to $125–145 billion, when it reported Q1 results — an increase that itself knocked the stock down roughly 7–8% in after-hours trading back in April. Meta's CFO has said the company isn't yet providing a specific 2027 capex outlook, calling planning "a very dynamic process."

Meta shares have been under pressure heading into tonight's report, with a notable pullback in the week before the print — most of it attributed to the same AI-spending anxiety that hit Alphabet, rather than anything company-specific.

What the Options Market Is Pricing In

Based on pricing from the day or two before this report, options tied to Microsoft's and Meta's earnings-week expirations were pricing in implied moves of roughly 7–8% for each stock — meaning the combined cost of an at-the-money "straddle" (buying a call and a put at the same strike, same expiration) works out to about that percentage of the current share price. That's the options market's collective estimate of how far each stock could travel, in either direction, once the numbers are out. It is not a prediction of direction — an implied move says nothing about whether a stock rises or falls, only how big a swing options sellers are demanding to be paid for.

Both stocks have appeared on lists of the week's largest implied-move names alongside Apple, which reports Thursday. Options pricing can and does shift right up until the closing bell, so any specific percentage quoted before the print is a snapshot, not a fixed number.

The Lesson Underneath Both Numbers: IV Crush

Here's what trips up newer options traders around events like this one. Implied volatility — the expected-swing-size number priced into an option — is elevated right now because the outcome is genuinely uncertain. The instant that uncertainty resolves (the earnings print hits), implied volatility collapses, even if the stock moves a lot. Traders call this IV crush.

That means a trader who buys a call the day before earnings and correctly predicts the stock will rise can still lose money on that option if the actual move is smaller than what was already priced in. Direction alone doesn't decide the trade — the size of the move relative to what was baked into the premium does.

Risks to Keep in Mind

Options tied to a single event like an earnings report can lose most or all of their value quickly if the stock doesn't move enough, or moves the wrong way, before expiration. Strategies that sell premium into earnings specifically to capture IV crush carry the opposite risk: an outsized move in either direction can produce a loss larger than the premium collected. Neither approach is safer by default — each carries its own, different risk that's worth understanding on its own terms, and options trading in general isn't suitable for every investor.

The Takeaway

Two of the market's largest companies report tonight, both carrying the same unresolved question that just cost Alphabet nearly 7% of its value: does AI infrastructure spending pay off fast enough to justify its size? The options market has already put a number on how much uncertainty that question is worth — roughly 7–8% for each stock. What happens after the number is where IV crush, not direction, often decides who wins and loses on an options position built around the event.

This article is educational commentary on public market events, not personalized investment, trading, or tax advice.