This week, Microsoft, Meta, Apple, and Amazon report quarterly earnings, with investors focused on one question: Is the record spending on artificial intelligence starting to generate real revenue? The stakes are high after Alphabet’s results last week showed strong cloud growth but a sharp drop in shares when the company raised its 2026 capital expenditure guidance to as much as $205 billion.
Alphabet’s Cloud Growth Overshadowed by Capex
Alphabet reported second-quarter revenue of $119.8 billion, up 24% from a year earlier, and diluted earnings per share of $9.11. Google Cloud revenue jumped 82% to $24.8 billion, a bright spot. But quarterly capital spending hit $44.9 billion, roughly double the year-earlier figure, and free cash flow turned negative at $5.9 billion. The company now expects 2026 capital expenditure of $195 billion to $205 billion, up from previous guidance. Shares fell about 4% in after-hours trading.
Microsoft’s AI Revenue Run Rate vs. Rising Costs
Microsoft’s fiscal year ends in June, and analysts expect earnings per share of $4.21, up from $3.65 a year earlier. Azure growth hit 40% last quarter, and the company guided to 39-40% constant-currency growth for June. CEO Satya Nadella said the AI business has passed a $37 billion annual revenue run rate. But the spending to get there is enormous. Additions to property and equipment reached $30.9 billion in the March quarter, up 84% year-over-year. Operating cash flow grew more slowly, and free cash flow fell 22% to $15.8 billion despite net income rising 23%. Depreciation and amortization rose 31% to $10.2 billion. Over the first nine months of its fiscal year, capital spending totaled $80.1 billion, up 69% from $47.5 billion. Microsoft’s commercial remaining performance obligation nearly doubled to $627 billion, signaling future revenue but also the scale of upfront investment.
Meta and Amazon Face Depreciation and Investment Drag
Meta’s depreciation climbed 54% to $6.0 billion. Its headline diluted EPS of $10.44 included an $8.03 billion income tax benefit; without it, EPS would have been approximately $7.31, close to the consensus of $7.13. The company guided to full-year costs of $162 billion to $169 billion and capital expenditure of $125 billion to $145 billion. Reality Labs lost $4.03 billion last quarter, while core revenue rose 33% to $56.31 billion, with advertising contributing $55.02 billion. Daily active users averaged 3.56 billion in March. Amazon’s trailing free cash flow fell to $1.2 billion from $25.9 billion a year earlier, driven by a $59.3 billion rise in equipment purchases. Its reported EPS of $2.78 included $16.8 billion in pre-tax gains from its Anthropic investment. Cloud revenue growth across the sector shows a mixed picture: Azure 40%, Google Cloud 82%, and Amazon Web Services 28%.
Apple Stands Apart as Capital-Light
Apple is the outlier among the four. The company is expected to report earnings per share of $1.88, and its capital spending is far lower than its peers. While Microsoft, Meta, and Amazon pour tens of billions into data centers and AI infrastructure, Apple has taken a more measured approach, relying on its existing hardware ecosystem and services revenue. Investors will watch whether Apple’s lighter spending strategy pays off in a market where AI investment is increasingly seen as a competitive necessity.
The combined Big Tech AI capital expenditure guidance for 2026 now runs into the hundreds of billions, with spending arriving on balance sheets well ahead of revenue. Microsoft, Meta, Apple, and Amazon report this week, and their results will show whether the revenue is starting to catch up.
