Markets reward AI-heavy capex only when it shows up in real cloud revenue
Alphabet’s cloud rocket, Microsoft’s AI spend, Amazon’s AWS rebound, and Meta’s capex wobble just gave the clearest signal yet about who is winning – and who is scaring – the AI trade.
CNBC reports that the four all beat quarterly revenue expectations.
Even so, Alphabet shares rose more than 6 percent in extended trading, Amazon gained about 3 percent, Microsoft was little changed, and Meta fell about 7 percent.
Cloud growth: Google takes the offensive
Alphabet’s Google Cloud posted the biggest upside surprise.
The same outlet reported that Google Cloud revenue surged 63 percent year over year to just over US$20bn, beating the StreetAccount estimate of US$18.05bn.
The company said the jump came from “enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services,” and disclosed a cloud backlog of US$460bn that nearly doubled quarter over quarter.
That outperformance fuelled a broader beat: as per Alphabet’s release, total revenue rose 22 percent to US$109.9bn, operating income increased 30 percent and operating margin expanded to 36.1 percent.
Net income jumped 81 percent to US$62.6bn, or US$5.11 per share, helped by US$37.7bn in unrealized gains on non‑marketable equity holdings.
Jefferies senior software analyst Brent Thill told CNBC “it looks like Google’s taking market share across all these clouds,” while Dan Nathan of RiskReversal Advisors said, “They are taking market share,” pointing to the 63 percent cloud growth and swelling backlog.
Microsoft and Amazon: strong clouds, heavy AI bets
Microsoft also delivered robust cloud numbers.
The outlet reported that revenue from Azure and other cloud services rose 40 percent, beating expectations from analysts surveyed by StreetAccount and CNBC, who had forecast 39.3 percent and 38.8 percent.
The Intelligent Cloud segment, which includes Azure, server products and GitHub and Nuance cloud services, reached US$34.68bn, above the US$34.27bn StreetAccount consensus.
Overall, Microsoft said revenue was US$82.9bn, up 18 percent, operating income was US$38.4bn, up 20 percent, and net income was US$31.8bn, up 23 percent on a GAAP basis.
Diluted EPS came in at US$4.27, up 23 percent.
The bigger story for Microsoft is spending.
According to CNBC, the company told investors capital expenditures for the year will reach US$190bn due to soaring memory costs.
Microsoft reported US$31.9bn in fiscal Q3 capex and finance leases, up 49 percent year over year but below the US$34.9bn Visible Alpha consensus.
Gross margin narrowed to 67.6 percent, the lowest since 2022, as depreciation from its data centre build‑out accelerated.
On its call, Microsoft’s finance chief Amy Hood projected capex of US$190bn in 2026, up 61 percent from 2025, and said she anticipates a US$25bn impact from higher component prices.
Visible Alpha’s consensus sat at US$154.6bn.
Amazon, meanwhile, showed that AWS has re‑accelerated.
The outlet said AWS revenue increased 28 percent year over year to US$37.59bn, its fastest growth in more than three years and ahead of the US$36.64bn StreetAccount estimate.
Total net sales rose 17 percent to US$181.5bn, operating income climbed to US$23.9bn from US$18.4bn, and net income jumped to US$30.3bn, or US$2.78 per diluted share, from US$17.1bn, or US$1.59.
Amazon has already told investors it expects capex to reach about US$200bn in 2026, a sharp increase from last year, driven primarily by AI infrastructure.
Meta: big profits, uneasy market
Meta posted the strongest revenue growth of the group but took the biggest hit.
The outlet reported that revenue rose 33 percent to US$56.31bn and net income climbed 61 percent to US$26.8bn, or US$10.44 per share.
Daily active people reached 3.56bn, up 4 percent year over year, but fell more than 5 percent from the fourth quarter, with Meta blaming “internet disruptions in Iran” and restricted WhatsApp access in Russia.
Capex was the flashpoint.
CNBC said Meta’s Q1 capex came in at US$19.84bn, well below the roughly US$27.57bn analysts expected, even as management raised full‑year 2026 capex guidance to US$125bn–US$145bn from US$115bn–US$135bn, citing higher component prices and data centre costs.
The stock dropped about 7 percent after hours as investors questioned the mix of softer user momentum and lumpy spending.
Macro and the AI trade: patience on a clock
Reuters reported that investors are now weighing these AI bets against a tougher macro backdrop.
The US Federal Reserve left rates unchanged at 3.5 percent–3.75 percent in an 8–4 vote, its most divided decision since 1992, and oil prices climbed after the White House confirmed that President Donald Trump told officials to prepare for a prolonged blockade of Iranian ports.
Noah Weisberger of BCA Research told Reuters he doubts investors will give the hyperscalers more than a year to show that higher capex is feeding through to sales, saying they want evidence of “capex spending” turning into “revenue growth as well.”
Walter Todd of Greenwood Capital added that if they pulled back, it would likely mean “a very negative reaction … in the whole basket of AI names.”
For now, according to both outlets, the market is rewarding the players whose cloud and AI revenues are clearly inflecting – especially Alphabet and, to a lesser extent, Microsoft and Amazon – and punishing any hint that the AI bill is coming due before the growth.
