Cloud gains and rising AI bets drive Big Tech Q1 earnings across key players

The latest Big Tech earnings season has made one thing unmistakably clear: artificial intelligence has shifted from promise to a capital-intensive race that is redrawing the cloud hierarchy and resetting investor expectations across Silicon Valley.

At the centre of the March quarter narrative is Alphabet, which delivered a breakout performance from Google Cloud that set the tone for the sector. The unit posted a 63 per cent revenue surge, its strongest growth on record, comfortably ahead of Microsoft Azure and Amazon Web Services.

AI spending accelerates across Big Tech

Across the industry, capital intensity shows no sign of easing. Combined AI-related spending among major US technology companies is now projected to exceed $700 billion in 2026, up from an earlier estimate of about $600 billion, underscoring the scale of the ongoing arms race in cloud infrastructure and AI capacity build-out.

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Alphabet chief executive Sundar Pichai said enterprise AI solutions have become the primary growth driver for Google Cloud for the first time, marking a structural shift in the business.

The momentum is being powered by surging demand for generative AI tools and rising adoption of Google’s in-house tensor processing units, increasingly positioned as an alternative to Nvidia-powered ecosystems.

The company has also begun selling its AI chips directly to select customers, expanding its addressable market and tightening control over the full AI technology stack.

But the growth story comes with a steep cost. Alphabet has raised its capital expenditure forecast to between $180 billion and $190 billion.

Microsoft holds steady in a fast-moving race

Microsoft delivered a solid but comparatively muted performance, with Azure revenue growing 40 per cent in the March quarter. While broadly in line with expectations, it lagged Alphabet’s sharper acceleration, reinforcing investor focus on relative positioning in the AI cloud hierarchy.

The company, however, signalled no slowdown in its investment cycle. Microsoft has outlined a $190 billion capital expenditure plan for 2026, driven by rising chip costs and sustained demand for AI computing capacity.

Chief financial officer Amy Hood said demand continues to exceed supply, while chief executive Satya Nadella pointed to stronger engagement across AI products such as Copilot.

Microsoft added five million users to its paid Copilot offering during the quarter, taking total users to around 20 million. Even so, enterprise adoption remains uneven, limiting near-term monetisation gains.

Amazon expands scale, but growth lags peers

Amazon Web Services posted 28 per cent revenue growth, maintaining its position as the largest cloud provider but continuing to lag Google Cloud and Microsoft Azure in growth momentum.

The company is leaning further into AI partnerships, including deeper collaboration with OpenAI and Anthropic, as it works to defend its cloud leadership position. Amazon has also reiterated its commitment to heavy investment, with annual capital spending remaining close to $200 billion.

ALSO READ: OpenAI and AWS seal cloud partnership a day after ending Microsoft exclusivity

Meta faces scrutiny over spending and regulation

Meta delivered a revenue beat but failed to impress investors, as rising capital expenditure and mounting regulatory risks weighed on sentiment.

The company raised its 2026 capital expenditure forecast to between $125 billion and $145 billion as it continues to prioritise large-scale AI infrastructure build-out. However, concerns around potential legal and regulatory liabilities tied to youth safety issues in the United States and Europe added pressure on the stock.

Meta also warned of a possible material financial impact from ongoing litigation, even as it pushes ahead with workforce restructuring and deeper integration of AI across its platforms.

A widening divide in Big Tech

This earnings season highlights a widening split in Big Tech performance. Companies that are successfully translating AI spending into visible cloud acceleration — led by Alphabet — are being re-rated higher. Others, still in the heavy investment phase without matching revenue upside, are facing sharper investor scrutiny as the AI cycle becomes increasingly execution-driven rather than promise-led.

With inputs from agencies.