Alphabet’s blowout cloud growth has reset expectations across major tech companies, leaving investors to recalibrate which firms are delivering the clearest returns.
All four of the US tech giants that reported results on Wednesday signalled that spending on AI would not slow down, with combined outlays now set to surpass US$700-billion this year, up from around $600-billion previously.
Alphabet shares jumped more than 6% in pre-market trading on Thursday, while Meta stock fell nearly 9%. Amazon shares rose 2.6%, while those of Microsoft dipped 1.8%.
The reactions underscore a growing divide as the biggest tech companies pour record sums into AI infrastructure, with investors increasingly rewarding those that are translating spending into clear revenue growth.
Amazon and Microsoft both reported faster growth in their cloud computing revenue in the March quarter at 28% and 40%, respectively. But those paled in comparison to Google Cloud’s 63% revenue surge, its best growth yet, which was far above estimates of 50.1%.
CEO Sundar Pichai said Google’s AI tools for large businesses had become Google Cloud’s primary growth driver for the first time, vindicating the company’s decision to turn its vast research capabilities into commercial gains.
Smaller but fast-growing
To be sure, Google’s cloud business is much smaller than those of Amazon and Microsoft and has only in the past several quarters started to contribute meaningfully to Alphabet’s overall revenue.
Meta also beat quarterly revenue expectations but warned of potential losses from a global backlash surrounding children’s safety on social media, adding to pressure from its ballooning AI spending.
“Google’s really the shining star so far in tech earnings,” said Ken Mahoney, CEO of Mahoney Asset Management.
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Analysts and investors believe Google is scooping up a large chunk of new computing demand thanks to its AI tools for businesses and powerful custom chips that have attracted customers like Anthropic. Pichai said Google had started selling its AI chips, which compete with Nvidia’s semiconductors, directly to some customers.
“It is capturing new workloads for the most part — sometimes from companies new to cloud, often additional workloads from customers of other clouds who want to be less dependent on a single cloud provider or who like Google data, analytics and AI offerings,” said Lee Sustar, principal analyst at Forrester.
Pichai said cloud growth could have been higher were it not for the industry-wide capacity constraints on computing power that have sparked Big Tech’s spending spree.
To overcome those shortages, the company bumped its annual capital spending forecast by $5-billion to between $180-billion and $190-billion and said it was planning another significant increase in 2027.
“The risk of sitting it out is bigger than the risk of leaning in,” said Daniel Newman, CEO of tech research firm Futurum Group, referring to the large AI bills. “Every hyperscaler understands that under-investing in this cycle is an extinction-level risk.”
Alphabet’s rising expenses will bring it closer to Amazon, which stuck with its $200-billion annual spending projection. That somewhat reassured investors who had dumped its stock in January when the forecast was first released.
Back-to-back deals deepening Amazon’s tie-ups with OpenAI and Anthropic have also lifted shareholder confidence. The company’s shares are up roughly 14% this year, as of last close, among the best performers in the “Magnificent Seven” group of tech mega-caps.
After a modest growth pick-up in Microsoft’s Azure cloud business initially sent shares lower, the company reassured investors with a prediction that revenue there would increase between 39% and 40%, in constant currency terms in its current quarter, better than expectations for 36.7% growth.
Surge in spending
But the expected revenue acceleration would also come with a surge in spending: its capital outlay for calendar 2026 is expected to total $190-billion. About $25-billion of that spending is coming from rising costs of components such as chips.
“Broad and growing customer demand continues to exceed supply,” chief financial officer Amy Hood said of Azure’s AI business on a post-earnings call.
Microsoft touted user gains for its Copilot AI assistant and said engagement levels for those using the tool equalled that of Outlook. Overall adoption of the Copilot, however, has remained sluggish.
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“Customers are going to Google because its AI is seen as more accurate and trustworthy than Copilot and because its full-stack approach is likely to drive greater economies of scale,” said Rebecca Wettemann, CEO of Valoir, an industry analyst firm, referring to Google’s focus on every layer of the AI technology chain including chips, data centres, AI models and developer tools. — Aditya Soni and Deborah Sophia, (c) 2026 Reuters
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