The latest earnings cycle from Alphabet, Microsoft, Amazon and Meta delivered a clear message: artificial intelligence remains the central battleground, but investors now demand measurable returns alongside rising costs.
Across the sector, capital expenditure continues to climb at historic levels. At the same time, early revenue signals from cloud and advertising businesses suggest that parts of the AI bet have begun to pay off.
Google pushes into AI hardware market
Alphabet introduced one of the most notable strategic shifts. Chief executive Sundar Pichai confirmed that the company will begin supplying its proprietary TPU chips directly to selected customers for use in their own data centres.
“We will begin to deliver TPUs to a select group of customers in their own data centres in a hardware configuration to expand our addressable market opportunity,” he said.
The move marks a departure from Google’s previous model, where AI chips remained inside its own cloud infrastructure. It also places the company in more direct competition with Nvidia, which has dominated the market by selling AI hardware systems.
Alphabet also raised its capital expenditure outlook to between $180bn and $190bn for 2026. Chief financial officer Anat Ashkenazi pointed to “unprecedented internal and external demand for AI compute resources” as a driver behind the increase. The company’s backlog for data centre contracts reached $460bn, which doubled from the end of last year.
Microsoft scales cloud and AI revenue
Microsoft reported revenue of $82.9bn for the quarter ending March 31, up 18% year-on-year, while net income rose 23% to $31.8bn. The company’s AI business exceeded a $37 billion annual revenue run rate, according to chief executive Satya Nadella.
Azure and other cloud services grew 40%, which reinforced the role of enterprise demand in driving AI adoption. Microsoft Cloud revenue reached $54.5bn, up 29%.
Chief financial officer Amy Hood said Azure is expected to grow between 39% and 40% in the June quarter, with further acceleration anticipated later in the year.
Microsoft increased its capital expenditure forecast to $190 billion. Executives said the spending will support data center expansion and address supply constraints that have limited cloud capacity.
Amazon signals strong demand but rising costs
Amazon presented a mixed picture. Chief executive Andy Jassy said the company’s cloud backlog rose to $364bn by the end of the first quarter, up from $244bn in December. The figure includes a $100bn agreement with OpenAI and excludes more than $100bn in additional capacity deals with Anthropic.
“There’s a reasonable breadth in that as well: it’s not just one customer,” Jassy said, according to Financial Times.
Amazon expects its AI-related revenue to reach $15bn this year. Its in-house chip business has already surpassed a $20bn annual run rate.
However, rising infrastructure and logistics costs continue to weigh on profitability. Chief financial officer Brian Olsavsky said higher fuel prices linked to geopolitical instability would increase transportation expenses. The company has introduced a 3.5% fuel surcharge for merchants who use its fulfilment network.
Meta faces pressure over spending plans
Meta reported strong advertising growth but faced a negative market reaction after raising its capital expenditure outlook. The company now expects to spend up to $145bn in 2026, up from a previous estimate of $135bn.
Chief executive Mark Zuckerberg said the increase reflects higher component costs, particularly memory pricing, and the need to expand computing capacity.
Chief financial officer Susan Li acknowledged uncertainty around future workforce size.
“We don’t really know what the optimal size of the company will be in the future,” she said, as BBC reported.
Meta continues to invest in custom AI chips developed with Broadcom and relies on systems from AMD and Nvidia to support its infrastructure.
Investors shift focus to returns
Market reactions highlighted a shift in investor expectations. Alphabet’s shares rose after it showed strong cloud growth and improving profitability. Meta’s stock fell in extended trading as concerns about spending overshadowed revenue gains. Microsoft and Amazon recorded more muted responses.
The broader question remains whether rising AI investment can translate into sustainable cash flow. Microsoft and Alphabet presented clearer early indicators through cloud and advertising performance. Amazon showed strong demand but weaker free cash flow due to heavy infrastructure spending. Meta demonstrated revenue strength but faced scrutiny over the scale of its investment plans.
The current earnings cycle suggests that AI no longer stands as a purely speculative growth story. Companies now face a more immediate test: prove that large-scale spending can deliver consistent revenue, margins and cash flow.
Anastasiia G
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