Alphabet, Microsoft, Amazon, and Meta report massive AI capex spending with Alphabet's cloud business growing 63%

On a single day during earnings season, Alphabet, Microsoft, Amazon, and Meta reported results within a 20-minute span. Alphabet's cloud business grew 63%, and all three major cloud providers—Alphabet, Amazon, and Microsoft—added $567 billion to their remaining performance obligations (RPO, money customers have committed to spend with locked-in prices) in just the last three months.

The three largest cloud companies hold combined RPO of $460 billion (Alphabet), $364 billion (Amazon), and $625 billion (Microsoft). Operating margins for Google Cloud have risen from near 0% about three years ago to over 30%. Hyperscalers are projected to spend $750 billion this year on capex, with Wall Street estimates of $1 trillion in 2027.

Lou Whiteman raised a return-on-investment concern: to achieve even a 7% return on invested capital—well below the historical 25% target for Alphabet, Microsoft, and Amazon—AI companies would need to generate $7 trillion in combined revenue by the end of a decade, compared to the current $1.5 trillion global enterprise software market. Jon Quast countered that Microsoft CEO Satya Nadella's vision of AI agents (autonomous AI that works asynchronously in the background) will expand total addressable market and drive higher compute usage across the tech stack.