Big Tech Earnings: Strong Revenues Meet Massive AI Capex

Amazon, Meta, Microsoft and Alphabet have delivered strong quarterly results – and made clear how deeply they are willing to invest in the AI build-out. Combined, the four tech giants plan to spend up to 725 billion US dollars this year, primarily on data centers and infrastructure. But markets are only rewarding the spending where investments are already visibly translating into revenue and margins. Serge Nussbaumer, Head of Public Solutions and capital markets expert at Maverix, puts the numbers into perspective.

Amazon: AWS Accelerates, Capex Weighs

Amazon reported quarterly revenue of 181.5 billion dollars and EPS of 2.78 dollars. Cloud unit AWS grew 28 percent to 37.6 billion dollars – its fastest growth rate since 2022. The outlook for the current quarter, with revenue of 194 to 199 billion dollars, also came in above expectations. Even so, the stock dropped more than three percent in after-hours trading.

Amazon CEO Andy Jassy spoke of “a once-in-a-lifetime opportunity” and stuck with the roughly 200 billion dollar investment forecast communicated three months ago. For Nussbaumer, Amazon remains strong “but has to prove that AWS growth, margins and capex discipline can work simultaneously.”

Meta: Strong Quarter, Raised Capex Outlook

The Facebook parent delivered the strongest operating quarter with 56.3 billion dollars in revenue (up 33 percent) and EPS of 10.44 dollars. For the second quarter, Meta is guiding to 58 to 61 billion dollars in revenue. At the same time, the company raised the upper end of its planned capital investments by ten billion dollars – now to 125 to 145 billion dollars.

Mark Zuckerberg stressed that he would rather build excess capacity than fall short. Investors reacted skeptically nonetheless, sending the stock down six to 6.5 percent after-hours. “Capex is weighing on the valuation in the short term. Strategically, however, Meta remains very attractive, as the company is already visibly translating AI into better ads, higher engagement rates and more efficient monetization,” Nussbaumer comments.

Microsoft: Azure Beat Meets Free Cash Flow Concerns

Microsoft beat expectations with 82.9 billion dollars in revenue and EPS of 4.27 dollars. Azure grew 40 percent, Microsoft Cloud reached 54.5 billion dollars. For the current fiscal year, the company is targeting capital investments of around 190 billion dollars – more than Wall Street had expected.

In the reporting quarter, capex rose to 31.9 billion dollars, while free cash flow fell 22 percent to 15.8 billion dollars. The stock traded 1.8 to 2 percent lower after-hours. Nussbaumer continues to see Microsoft as “the highest-quality cloud and AI compounder” but considers the stock vulnerable in the short term “as long as the market is demanding more evidence for the return on AI investments.”

Alphabet: The Clear Winner of the Quarter

Alphabet posted revenue of 109.9 billion dollars – up 22 percent – and EPS of 5.11 dollars. Google Cloud jumped 63 percent to around 20 billion dollars, with cloud margins expanding significantly. CEO Sundar Pichai also reported an all-time high in Google searches, driven in part by new AI features.

Alphabet raised its capital expenditure range by five billion to 180 to 190 billion dollars, with the prospect of “significantly” more in 2027. The stock rose 3.5 to seven percent after-hours. “Alphabet refutes, for now, the thesis that AI will destroy the search business in the short term. On the contrary: Search, YouTube, Subscriptions and Cloud are increasingly interlocking,” says Nussbaumer.

Bottom Line: Alphabet and Meta in the Lead

Over the next twelve months, Nussbaumer favors Alphabet and Meta over Amazon and Microsoft. Both companies are currently the most convincing in monetizing high AI costs quickly. Alphabet scores with the strength of Search, cloud momentum and fading fears of AI disruption; Meta, despite carrying the heaviest capex burden, shows the most direct operating leverage from AI in advertising and monetization. Amazon and Microsoft remain strong quality names – “but with both, the market is currently more sensitive to investments, margins and free cash flow.”