Alphabet Inc., the parent company of Google, is starting to show measurable gains from its AI investments, while Meta Platforms Inc. is still working to convince investors that its heavy spending will pay off.
Summary
- Alphabet Inc. shares rose 6.6% after $20B cloud revenue beat estimates, signalling early returns from AI investments and strong enterprise demand.
- Meta Platforms Inc. stock fell over 6% as capex guidance increased to $145B, with analysts citing weak engagement in its standalone AI app.
- Amazon.com Inc. and Microsoft Corp. reported strong cloud growth, reinforcing AI demand, though Copilot adoption reached only 20M paid users.
The updates came within minutes of each other on Wednesday, as Alphabet Inc., Meta Platforms Inc., Amazon.com Inc., and Microsoft Corp. all reported results. Together, the four companies remain at the center of a global AI infrastructure buildout expected to run into the trillions of dollars.
Both Alphabet and Meta added another $10 billion to their capital spending plans, pushing the group’s combined outlay to as much as $725 billion for 2026. The scale of that investment continues to draw scrutiny, with investors focused on whether it is translating into clear financial returns.
Alphabet pointed to strong performance in its cloud division as evidence of traction. The unit generated $20 billion in revenue last quarter, ahead of expectations of $18.4 billion. Growth accelerated as demand for AI-driven tools and infrastructure increased.
“Our AI models have great momentum,” CEO Sundar Pichai said on a call with analysts. “We are bringing helpful AI into the hands of billions of people every day through our products and platforms.”
The company’s backlog — contracted business yet to be recognized as revenue — nearly doubled quarter over quarter to more than $460 billion. Consumer-facing AI products also performed strongly, with Pichai describing the period as the best yet for services such as the Gemini app.
Markets responded positively. Alphabet shares rose 6.6% in late trading, outperforming peers, while futures tied to the Nasdaq 100 Index moved higher.
Meta’s update drew a more cautious response. The stock fell over 6% after the company lifted its full-year capital expenditure outlook to as much as $145 billion, partly due to higher component costs.
While other tech firms are also increasing spending, Meta’s returns remain less visible. The company lacks a cloud business comparable to rivals and has yet to build similar momentum around its consumer AI offerings.
“Meta’s standalone app hasn’t had the amount of engagement,” Mandeep Singh noted.
CEO Mark Zuckerberg defended the strategy but offered limited specifics. He acknowledged the company does not have “a very precise plan” for how each AI product will evolve, adding that his responses might be “unfulfilling” as development continues.
Industry observers say the uncertainty reflects the scale of the opportunity. “With the potential payoff of AI leadership seemingly so high, the companies continue to make those bets,” Lee Sustar said, pointing to the pressure on investors to weigh risks against long-term gains.
Cloud growth at Amazon and Microsoft signals steady AI demand
At Amazon.com Inc., cloud revenue rose 28% year over year, its fastest pace since mid-2022. The performance is often seen as a proxy for enterprise AI adoption, given the role of its infrastructure in training and deploying models.
Amazon has also benefited from its ties to leading AI developers, including OpenAI and Anthropic. Shares moved higher after reports that Anthropic is exploring a new funding round that could value the company at more than $900 billion.
Microsoft Corp., another major cloud provider, signaled continued growth ahead. The company expects Azure revenue to increase by about 40% in the current quarter, with some acceleration later in the year.
Still, adoption of its AI tools remains uneven. Paid subscriptions for its Copilot features reached 20 million, up from 15 million in the previous quarter, but only a small share of its overall Office user base.
Investor reaction to Microsoft’s results was subdued, with the stock edging lower in extended trading. Tyler Radke described the quarter as “solid execution,” though not yet a clear shift in growth momentum.
