Here’s What We Learned From Big Tech Earnings Last Week

Earnings season kicked into high gear last week when five of the Magnificent Seven members with a combined market value of over $15 trillion reported results.

The tech titans—Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and Meta (META)—reported better-than-expected results across the board, and forecast their massive investments in artificial intelligence will grow in the coming year.

Below, we take a closer look at some of the key takeaways from this round of big tech earnings.

No AI Investment Slowdown in Sight

One thing made clear in last week’s earnings calls, was that the hyperscalers’ AI investments are showing no signs of a pullback.

Amazon on Thursday raised its full-year capital expenditures forecast and said that investments will increase next year. Alphabet also bumped up its capex guidance for the third time this year and forecast another “significant” increase next year. Microsoft didn’t share a quarterly or full-year capex estimate, but CFO Amy Hood said investments will grow even faster in fiscal year 2026 than in 2025. 

Executives stressed that, despite their massive investments up to this point, they expect demand will continue to outstrip supply into next year. Microsoft’s cloud computing platform, Azure, likely bore the brunt of its capacity constraints, according to Hood, who said the company has been forced to prioritize other core business offerings. She, like Meta CEO Mark Zuckerberg, also said that their internal AI teams need more computing capacity. 

Citi analysts in a note on Thursday said they expect cloud data center capex to grow 24% in 2026, which should be a boon to semiconductor makers like Nvidia (NVDA), Broadcom (AVGO), and Advanced Micro Devices (AMD).

Not All AI Spending Is Good News

Spending on data centers is all well and good with Wall Street, as long as investors perceive rising profits will make it worthwhile.

Meta shares tanked on Thursday after the company posted earnings that missed estimates due to a one-time tax charge, and raised the low end of its full-year capex guidance. Meta also said it expects its capex growth will accelerate next year.

“The real focus coming out of earnings is Meta’s updated view on 2026 capex and expenses as the company looks to build out an industry-leading amount of compute,” JPMorgan analysts told clients in a note Thursday. “The costs for Meta are outsized relative to Google and Amazon, as those companies are larger and both have cloud businesses that provide an immediate path to Gen AI monetization, unlike for Meta,” they said. 

Higher operating costs added to Wall Street’s concerns about Meta’s AI spending. Total expenses rose 32% year-over-year in the third quarter, compared to 12% in the previous quarter, and are expected to grow even faster next year. 

Employee compensation was one of the largest contributors to rising expenses. Meta went on an AI hiring spree this year, making headlines for poaching top talent with eye-watering pay packages. That’s added more pressure on Meta to find ways to cut costs. Recent reports of layoffs, including in its AI division, could point to some signs of strain in Meta’s efforts to keep its spending in check.

AI May Change Businesses in Surprising Ways

In the first inning of the AI craze on Wall Street, Alphabet was often looked at as a laggard in the space. Its Bard chatbot flubbed its first public demonstration, and analysts worried that the rising popularity of chatbots from startups like OpenAI, Anthropic, and Perplexity, could spell major disruption for Google’s core search business. However, Alphabet’s strong quarterly results—thanks in part to AI search features—would counter that narrative.

According to executives, Google’s AI search features, AI Overviews and AI Mode, are helping to increase search query volume, the opposite of what Wall Street expected. Google’s search revenue growth has accelerated throughout the year, rising from 10% to 12% in the second quarter, and then to 15% in the third. Executives added that Google is monetizing AI search queries at about the same rate as traditional search. 

“Search acceleration (paid clicks up 7% vs 4% in 2Q) despite OpenAI’s strong usage growth suggests AI is expanding the overall ‘information’ opportunity, driving higher query volume and improving monetization,” wrote Bank of America analysts in a note on Thursday.

Executives Aren’t That Worried About Concentration Risk

Some investors have become concerned in recent months that the AI boom is being fueled by a handful of companies striking very large deals.

For example, OpenAI accounted for nearly all of Oracle’s (ORCL) massive cloud computing backlog in the most recent quarter, and Nvidia said in its most recent earnings report that two direct customers accounted for almost 40% of its quarterly sales.

But Microsoft executives sought to soothe worries about concentration risks during Wednesday’s earnings call. When asked about the breadth of contracts contributing to Microsoft’s record backlog, which grew 51% to $392 billion, CFO Amy Hood said, “it covers numerous products. It covers customers of all sizes.”

CEO Satya Nadella also suggested he sees broadening demand related to AI over time, telling analysts, “concentration risk gets mitigated by being thoughtful about how you really ensure the build is for the broad customer base.” The wider enterprise adoption cycle, he said, “is just starting.”