Good Afternoon. On this day in 1965, President Lyndon B. Johnson signed Medicare and Medicaid into law, turning a sweeping promise into two programs whose value couldn’t just be promised; it had to be delivered.

Today, markets used the same rubric: spending got rewarded when the results were visible, and questioned when the payoff still looked far away.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

🔢 Big number: $53.4 billion — That’s Quanta Services’ record backlog, a sign that the AI boom’s power needs are becoming contracted work for the companies building the grid.

AI spending got its clearest report card yet, and the market didn’t grade on effort. Microsoft showed that cloud demand can make a giant construction budget look productive, while Meta reminded everyone that fast growth doesn’t erase questions about when the cash returns.

The news: Microsoft’s quarterly revenue rose 18% to $90.0 billion, Azure grew 43%, and its commercial backlog reached $678 billion. Meta’s revenue rose 28% to $60.8 billion, but costs jumped 55%, operating margin fell to 31%, and free cash flow shrank to $784 million as capital spending reached $31.1 billion. Microsoft was up close to 16.5% late in the session, while Meta was down close to 8.5%.

What’s next: The market isn’t rejecting AI investment; it’s separating the companies already turning it into cloud usage, advertising gains, and signed demand from those asking for more patience. Microsoft still has to deliver on a much larger footprint, while Meta needs its new capacity to produce enough revenue and cash to keep the spending story credible.

Source: Axios

The U.S. economy lost speed last quarter, though it didn’t stall. Consumers spent more, businesses invested, and inflation cooled a little, which made the headline slowdown less alarming than the 1.5% growth rate suggests.

The news: Gross domestic product grew at a 1.5% annual rate in the second quarter, down from 2.1% in the first. Consumer spending accelerated to 3.2%, business investment outside housing rose 8.4%, and a surge in imports subtracted 1.5 percentage points from growth. The Federal Reserve’s preferred inflation measure eased to 3.7% from 4.1%, though core inflation remained 3.3%.

Bottom line: This isn’t an economy asking for rescue, but it isn’t giving the Fed an easy victory either. Healthy spending and investment can support jobs and profits, while core inflation above target keeps borrowing costs from falling on autopilot. The next question is whether households can maintain that pace as prices and rates stay elevated.

Source: Associated Press

Starbucks has spent its turnaround trying to make a coffee run feel worth the price again. It’s using faster service, remodeled cafés, and a tighter menu to produce what matters most: more visits and a stronger sales outlook.

The news: Global and U.S. same-store sales rose 7.9%, beating an analyst estimate of 5.7%. The company lifted its full-year global same-store sales forecast to 6% from 5% and raised its adjusted earnings outlook to $2.55–$2.65 a share. It’s redesigned more than 1,000 stores and plans to update another 500, even as quarterly revenue slipped 1% partly because of its China transaction.

Big picture: Starbucks isn’t fixing the brand with price increases alone; it’s testing whether a better store experience can rebuild traffic and loyalty. That’s a useful lesson for other consumer brands facing selective shoppers: operational improvements can create room for growth, but the gains need to last after the easiest remodels and menu changes are finished.

Source: Associated Press

The AI boom needs more than chips and software; it needs substations, transmission lines, and skilled crews. Quanta Services is turning that physical bottleneck into record contracted work, and it’s giving the infrastructure side of the boom a clearer path to revenue.

The news: Quarterly revenue climbed to $9.56 billion from $6.77 billion, adjusted earnings reached $4.24 a share, and backlog rose to a record $53.4 billion. Management lifted its full-year revenue outlook to $39.3–$39.7 billion, and it’s seeing utility modernization, new power generation, and data-center demand support activity across its electric and infrastructure operations.

What’s next: A backlog isn’t cash until projects get built, so execution and labor availability still matter. Yet Quanta’s numbers show that rising electricity demand has moved beyond forecasts and into signed work. Utilities, data-center developers, and communities will now have to keep permitting and construction moving fast enough to turn that demand into usable power.

Source: Quanta Services

Weekly jobless claims rose, but the labor market still isn’t showing broad stress. New filings remain near historically low levels, giving Friday’s employment report a steadier setup than the latest round of corporate layoff headlines might imply.

The news: Initial claims increased by 9,000 to 197,000, below the 207,000 economists expected. The four-week average fell to 202,750, and continuing claims declined by 7,000 to 1.78 million. It’s a snapshot of limited layoffs, though claims can’t show whether hiring is strong enough for people entering the workforce or changing jobs.

Bottom line: Employers still appear reluctant to cut workers at scale, which helps household income and spending. The softer risk is a low-hire environment where people keep their jobs but have fewer opportunities to move. Friday’s payroll growth, unemployment rate, and wage data should show whether stability is becoming momentum or merely holding the line.

Source: U.S. Department of Labor

The eurozone grew faster than expected even as conflict and energy uncertainty tested confidence. It’s a result suggesting public investment, defense spending, and technology demand are giving the region more support than its cautious reputation would imply.

The news: Eurozone output expanded 0.4% from the prior quarter, roughly twice the pace economists expected, while the broader European Union grew 0.5%. Spain advanced 0.7%, France 0.3%, and Germany 0.2%. Ireland’s 3.9% rebound also lifted the total, though its multinational-heavy economy can make the regional number look more volatile.

Big picture: Europe’s expansion is welcome, but it hasn’t removed the need for durable private-sector growth. Government and defense outlays can support activity now; stronger productivity, investment, and household demand have to carry more weight later. The regional average also hides a wide gap between faster southern economies and countries still struggling to accelerate.

Source: El País

Adidas didn’t have trouble selling World Cup gear, but the celebration came with an expensive marketing tab. Shares were down close to 17.0% because the tournament helped revenue while promotional costs kept operating profit below expectations.

The news: Sales rose 14%, gross margin reached 52.5%, and World Cup-related revenue approached €1.5 billion. Operating profit of €574 million missed an expected €616 million after roughly €212 million of additional marketing spending. Management’s raised its sales forecast to growth of as much as 10%, yet kept its annual operating-profit goal at €2.3 billion.

What’s next: A global tournament can buy attention, but Adidas still has to prove that new fans will become repeat customers after the final whistle. The stronger sales forecast is encouraging; the unchanged profit outlook says brand momentum alone won’t be enough unless marketing efficiency and full-price demand improve in the second half.

Source: Cinco Días

The Bank of England kept rates unchanged, but three policymakers wanted an increase. It’s a disagreement that matters because inflation has eased without disappearing, and another energy shock could slow the path back to price stability.

The news: The central bank held its benchmark rate at 3.75% in a 6–3 vote, its fifth hold of the year. Inflation was 2.6% at the latest reading, still above the bank’s 2% target, and the dissenters preferred a quarter-point increase. The majority judged that current policy remains restrictive while it waits for clearer evidence on wages, demand, and energy costs.

Bottom line: Britain’s borrowers didn’t get a higher rate today, but they didn’t get a promise of relief either. The split tells households and businesses to plan for rates that may stay elevated, especially if energy costs feed into broader prices. One favorable inflation report won’t settle a debate that now has three officials leaning the other way.

Source: Bank of England

Q: Why’d the cloud accountant bring an umbrella to the earnings call?

A: He heard the forecast called for heavy spending.

The practice of investing only when the expected return justifies the cost and risk.

In a sentence: Microsoft’s AI growth made its spending look more disciplined, while Meta’s rising costs gave the market less confidence that every new dollar would earn an attractive return.

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