Big Tech earnings put AI bets to the test as Alphabet pulls ahead
Microsoft and Meta must show their costly AI investments can drive growth, as Alphabet’s strong Gemini reception and new deals give it momentum.
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By Torontoer Staff
Microsoft and Meta open Big Tech earnings this week under pressure to prove their multibillion‑dollar investments in artificial intelligence can deliver another year of meaningful growth, as Alphabet’s recent gains shift investor attention. The group, including Amazon, is expected to increase AI spending roughly 30 per cent this year, pushing total outlays above US$500 billion and intensifying scrutiny on returns.
Alphabet’s strong reception for its Gemini 3 model, and a deal to power Apple’s revamped Siri, helped send its shares up about 29 per cent in the last quarter, while Microsoft and Meta both fell more than 6 per cent. Investors will be watching Wednesday’s reports from Microsoft and Meta, and next week’s results from Alphabet and Amazon, for signs that the AI push moves beyond hype.
AI spending and investor scepticism
Big Tech’s unprecedented spending spree on AI has raised questions about how quickly businesses will convert capacity and models into revenue and cost savings. A recent PwC survey of 4,454 CEOs found more than half reported no clear revenue or cost benefits yet from their AI investments, a finding that feeds fears of overvaluation in the sector.
For this not to be a bubble by definition, it requires that the benefits of this are much more evenly spread.
Satya Nadella, Microsoft CEO
Analysts say the market has moved from excitement to heightened expectations, with some sentiment shifting to what Morgan Stanley called “a wall of worry”, reflecting growing competition for cloud capacity and partnerships such as Microsoft’s stake in OpenAI.
Quarterly outlook and cloud trends
Cloud revenue growth will be a central benchmark for investors. LSEG estimates Google Cloud revenue accelerated to about 35 per cent year over year in the October to December quarter, up from 33.5 per cent the previous quarter. Microsoft’s Azure is forecast to grow about 38.8 per cent, slightly below the prior quarter’s 40 per cent jump, while Amazon Web Services is expected to post roughly 21.1 per cent growth, up from 20.2 per cent.
Those figures matter because cloud services are the primary route through which AI models are monetized, via enterprise tools, search enhancements and third‑party partnerships.
Company snapshots
- Microsoft: Revenue is likely to have risen about 15.3 per cent to US$80.27 billion in the October‑December quarter, a slowdown that would mark the weakest growth in three quarters. Microsoft has warned of AI capacity constraints expected to last at least until June, and higher memory chip prices have clouded the outlook for PCs, which support its personal computing business.
- Meta: AI enhancements to ad search and recommendations are expected to help drive revenue up about 20.6 per cent to US$58.35 billion. The company’s heavy hiring of AI talent, however, is set to pressure profit growth toward a near three‑year low.
- Alphabet: Revenue is expected to climb roughly 15.5 per cent to US$111.37 billion, supported by AI integration into search and a steady advertising market. Alphabet also opened a new revenue stream by agreeing to supply Anthropic with its Tensor Processing Units and secured a deal to power Apple’s new Siri, moves that helped lift investor sentiment.
- Amazon: Revenue growth is forecast near 12.5 per cent, slightly slower than the prior quarter, as the North America retail business moderates. Amazon’s ongoing cloud strength remains a key part of its earnings story.
Alphabet has the upper hand in the AI race as investors recognize that proprietary ecosystems, such as Apple and Search in Google, are tough to penetrate.
David Wagner, head of equities at Aptus Capital Advisors
What investors will watch
- Guidance on AI spending and capacity constraints, especially Microsoft’s projections through mid‑year.
- Cloud revenue growth and margins at Google, Microsoft and Amazon, which indicate monetization of AI services.
- Profitability trends at Meta as hiring costs and investments in generative models pressure margins.
- New commercial deals and chip sales, such as Alphabet’s Anthropic arrangement and partnerships with device makers.
- Management commentary on timing for tangible customer benefits from AI, including enterprise adoption and advertising improvements.
Earnings will not only reveal how much revenue came from AI initiatives, they will also shape investor expectations for 2026. Markets are looking for clearer signs that the large outlays on models, data centres and specialised chips translate into repeatable revenue and sustained profit improvements.
If Microsoft and Meta can show progress, the sector’s heavy spending could be framed as necessary investment. If they cannot, Alphabet’s recent momentum may prompt a re‑rating of where the real winners in the AI shift will be.
Big TechAIearningsMicrosoftMetaAlphabet
