Google Cloud pulls ahead as Big Tech’s AI bet swells to US$700 billion

[CALIFORNIA] Alphabet’s blowout cloud growth has reset expectations in major tech companies, leaving investors to recalibrate which companies are delivering the clearest returns.

All four of the US tech giants that reported results on Wednesday (Apr 29) signalled that their spending on artificial intelligence would not slow down.

Combined outlays are now set to surpass US$700 billion in 2026, up from around US$600 billion previously.

Alphabet shares jumped more than 6 per cent in premarket trading on Thursday, while Meta stock fell nearly 9 per cent.

Amazon shares rose 2.6 per cent, while those of Microsoft dipped 1.8 per cent.

The reactions underscore a growing divide, as the biggest tech companies pour record sums into AI infrastructure.

Investors are also increasingly rewarding the companies 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 per cent, respectively.

But their revenue increases paled in comparison to Google Cloud’s 63 per cent revenue surge, its best growth yet, which was far above estimates of 50.1 per cent.

SEE ALSO

Big Tech’s US$16 trillion earnings week is make-or-break for rally

Alphabet sales beat estimates on Google cloud, AI customers

Alphabet, Amazon outpace Meta in AI during earnings bonanza

CEO Sundar Pichai said Google’s AI tools for large businesses had become Google Cloud’s primary growth driver for the first time, vindicating Alphabet’s decision to turn its vast research capabilities into commercial gains.

Google’s cloud business is also much smaller than those of Amazon and Microsoft.

It has only in the past several quarters started to contribute meaningfully to Alphabet’s overall revenue.

Meta also beat quarterly revenue expectations.

However, it warned of potential losses from a global backlash surrounding children’s safety on social media, adding to pressure from its ballooning AI spending.

Ken Mahoney, CEO of Mahoney Asset Management, said: “Google’s really the shining star so far in tech earnings.”

Google grabs new cloud business

Analysts and investors believe Google is scooping up a large chunk of new computing demand, due to its AI tools for businesses and powerful custom chips that have attracted customers such as Anthropic.

Pichai said Google had started selling its AI chips, which compete with Nvidia’s semiconductors, directly to some customers.

Lee Sustar, principal analyst at Forrester, said: “It is capturing new workloads for the most part – sometimes from companies new to cloud (and) 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.”

Pichai said cloud growth could have been higher, were it not for the industry-wide capacity constraints on computing power that have sparked the Big Tech’s spending spree.

To overcome those shortages, the company bumped its annual capital spending forecast by US$5 billion to between US$180 billion and US$190 billion.

It also said it was planning another significant increase in 2027.

Referring to the large AI bills, Daniel Newman, CEO of tech research company Futurum Group, said: “The risk of sitting it out is bigger than the risk of leaning in.

“Every hyperscaler understands that underinvesting in this cycle is an extinction-level risk.”

Alphabet’s rising expenses will bring it closer to Amazon, which stuck with its US$200 billion annual spending projection.

It will somewhat reassure 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 per cent in 2026, as at last close.

It is among the best performers in the Magnificent Seven group of tech mega-caps.

Microsoft cloud, outlay forecasts exceed estimates

After a modest growth pickup 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 per cent.

The increase would be in constant currency terms in its current quarter, exceeding expectations of 36.7 per cent growth.

But the expected revenue acceleration would also come with a surge in spending – its capital outlay for the calendar year of 2026 is expected to total US$190 billion.

About US$25 billion of that spending is coming from rising costs of components such as chips.

Referring to Azure’s AI business, Amy Hood, the chief financial officer of Microsoft, said: “Broad and growing customer demand continues to exceed supply.”

Microsoft touted user gains for its Copilot AI assistant and said engagement levels for those using the tool is equal to that of Outlook.

Overall adoption of the Copilot, however, has remained sluggish.

Rebecca Wettemann, CEO of Valoir, an industry analyst company, said: “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.”

She was referring to Google’s focus on every layer of the AI technology chain including chips, data centres, AI models and developer tools. REUTERS