On April 29th, four major technology firms—Alphabet, Meta Platforms, Microsoft, and Amazon.com—released their quarterly earnings reports on the same day. While all exceeded Wall Street's expectations, the market rewarded only one company.
Alphabet's stock surged over 7% in after-hours trading on Wednesday, April 29th, making it the sole winner in this earnings season's "Super Bowl." Google Cloud's quarterly revenue grew 63% year-over-year to $20 billion, and its backlog of orders nearly doubled to $46.2 billion, providing clear justification for substantial capital expenditures. CEO Sundar Pichai stated during the earnings call, "Our AI investments and full-stack approach are illuminating every facet of our business."
In contrast, Meta's shares fell over 7% after hours, while Microsoft and Amazon.com each declined approximately 2%. The common challenge for these three companies lies in significantly rising capital expenditures, coupled with cloud business growth that either fell short of expectations or merely met them, intensifying investor skepticism about whether AI investments will translate into visible returns.
Analysts note that the core divergence this earnings season is not about which company performed better, but whose spending appears more justified. This reflects a market reassessment of the AI narrative for tech giants—investments backed by concrete orders are rewarded, while spending without clear monetization pathways is penalized.
**Alphabet: Cloud Business Surge and AI Investment Validation** The standout performance for Alphabet this quarter centered on Google Cloud. Earnings revealed that cloud revenue increased 63% year-over-year to $20 billion, with an operating profit margin of 33%, significantly surpassing market forecasts. More critically, Google Cloud's order backlog nearly doubled from the previous quarter to $46.2 billion, driven primarily by AI demand and Tensor Processing Unit hardware sales. This figure provides direct support for Alphabet's revised capital expenditure plans. The company raised its full-year capital expenditure guidance from a previous range of $175-185 billion to $180-190 billion, hinting at a "substantial increase" by 2027. Investors are so captivated by Google Cloud's growth that they are willing to overlook the elevated capital expenditure outlook. Jake Behan, Capital Markets Director at Direxion, noted in a report, "Alphabet's investments are paying off because they are supported by a $460 billion order backlog." CFO Anat Ashkenazi stated on the call, "Internal and external demand for our AI compute resources is at unprecedented levels." Pichai added, "Our cloud revenue could have been even higher if we could meet the demand."
The advertising business also remained robust. Search advertising revenue grew 19% to $60.4 billion, YouTube ad revenue increased 11% to nearly $10 billion, and subscriptions, platform, and device revenue rose 19% to $12.4 billion.
**Amazon.com and Microsoft: Cloud Growth Under Scrutiny** Unlike Alphabet's smooth performance, the cloud business results from Amazon.com and Microsoft, while solid, failed to fully meet the market's high expectations. Jefferies analyst Brent Thill wrote in a post-earnings report that although Amazon.com's AWS accelerated to 28% growth this quarter, the result slightly missed the targeted range of 28% to 30%. UBS analyst Stephen Ju also pointed out that AWS's 28% growth fell short of UBS's and investors' expectations of 32% and over 30%, respectively, which would likely pressure the stock in the near term.
However, strong performance in Amazon.com's e-commerce and advertising segments, along with optimistic second-quarter guidance, provided some support for the share price.
For Microsoft, despite reporting a sequential increase of 5 million paid Copilot subscriptions, Azure's revenue growth of 39% only matched expectations. Barclays analyst Raimo Lenschow viewed Microsoft's first-quarter results as solid but lacking major surprises. He noted that Azure's steady growth (39% at constant currency) compared to the significant acceleration at AWS (28%) and GCP (63%) might spark further market debate.
Additionally, Microsoft plans to spend $19 billion on capital expenditures this year, below the market's expectation of $38 billion, potentially raising questions about its AI momentum.
**Meta Platforms: Surging Capital Expenditures Spark Concern** Meta Platforms finds itself in a more precarious position. Analysis indicates that although its first-quarter revenue grew 33%, exceeding forecasts, this was insufficient to justify increased capital spending in investors' eyes. Meta now plans to spend $125-145 billion in 2026, up from a prior expectation of $115-135 billion. Unlike the other three hyperscale cloud computing firms, Meta does not operate a cloud business selling AI computing capacity to customers. UBS analyst Esha Vaish noted that the increased capital expenditure guidance and in-line second-quarter revenue outlook offset the positive first-quarter revenue and profit beat, thereby weighing on the stock. Investors will closely monitor data points related to product development, such as business chatbots and Meta AI, and the rationale for the expanded capital expenditure budget.
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