Big Tech earnings signal strong AI growth

Several major US tech companies released earnings yesterday, offering a rare snapshot of the industry and easing fears of an AI-driven market bubble.

Amazon, Alphabet, and Microsoft reported strong double-digit growth in cloud computing, driven by rising demand for artificial intelligence. Meta Platforms missed Wall Street expectations but still showed solid revenue growth.

Alphabet’s cloud revenue surged 63% year-on-year to $20.03 billion, beating estimates of $18.05 billion and rising sharply from $12.3 billion last year. The company reported an 81% increase in profit, fueled by AI investments.

Amazon Web Services exceeded expectations, growing 28% year over year to $37.6 billion. Ad revenue hit $17.24 billion, topping the $16.87 billion forecast.

Microsoft’s cloud segment, including Azure, rose 40% to $34.7 billion. The company also announced that its capital expenditure would reach $190 billion this year.

Meanwhile, Meta Platforms fell more than 6% after reporting capex below expectations and missing user growth targets. The company doesn’t offer cloud services.

Investors are closely tracking these results because the companies plan to spend about $650 billion on AI infrastructure by 2026. Their performance matters greatly, as the Magnificent Seven stocks account for over 30% of the S&P 500. 

Strong earnings helped calm market concerns. Alphabet rose 7% after hours, Amazon gained 4%, and Microsoft fell roughly 2% following the reports, as investors reacted to spending plans.

At the same time, AI expansion is reshaping the workforce. Over 92,000 tech workers have lost jobs globally this year, as companies invest more in automation. 

Overall, the results suggest AI is already boosting revenue, especially through cloud services.