Ai Hyperscalers Report Big Earnings, And Even Bigger Spending Plans

Four of the Magnificent Seven—Alphabet, Amazon, Meta, and Microsoft—reported quarterly earnings after the market closed yesterday. They all beat top- and bottom-line expectations, and three revealed higher capital expenditure plans for the year than anticipated. Here’s a roundup of takeaways from after the bell:

• Alphabet went to the head of the investor class after demonstrating what CEO Sundar Pichai called its strongest quarter to date for consumer AI services. It reported that profit jumped by 81%, driven by AI investments. Google Cloud brought in $20 billion last quarter, over an expected $18.4 billion, thanks to an uptick in adoption of tools like Gemini and AI infrastructure.
• Amazon also saw big gains in cloud computing, which rose 28% year over year and exceeded estimates. Advertising reached $17.24 billion, above the expected $16.87 billion, with most of that revenue coming from sponsored product listings on the Amazon marketplace.
• When analysts asked Meta CEO Mark Zuckerberg about the accelerated spending on, he said he does not have “a very precise plan,” only “a sense of the shape of where things need to be.” Meta doesn’t sell cloud computing, unlike the other three. Meta also said that its youth safety court cases “may ultimately result in a material loss.”
• Microsoft cited the persistence of high-priced memory while announcing that its capital expenditures would likely hit $190 billion this year. The company announced 5 million new paid users for the Copilot AI tools since last quarter, bringing the total to 20 million, but investors worry there’s not enough demand for the Office add-on.

Following the reports, Alphabet stock rose 7% in after-hours trading, Amazon rose 4%, Meta fell ~6%, and Microsoft fell ~2%, largely because of how investors were feeling about their spending plans.

Zoom out: This month will likely be tech stocks’ best since April 2020, at the start of the Covid pandemic. The Nasdaq was up 14% for the month as of close-of-day yesterday.—HVL