Big Tech results – AI train shows no signs of slowing in

Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Big Tech results gave investors plenty to chew over, but the broad message was hard to miss as AI moves from promise to profit engine.

“Growth was strong across the group, cloud demand accelerated, and the message from management was clear: the buildout continues.

“The market was less united on what to make of the spending plans, with investors still trying to balance the scale of the AI opportunity against the cash required to chase it.

“But the bigger takeaway is that this cycle is nowhere near cooling.

“The train has left the station, demand for compute is still running ahead of supply, and with expectations for 2027 capex still looking too low, the AI hardware trade looks like it has further to run.

“Alphabet looks every inch the market darling right now, and investors are rewarding a business that is delivering on both sides of the AI debate: cloud is accelerating hard, while Search is proving far more resilient than many feared.

“It is almost hard to believe that a year ago, Alphabet was being written off by parts of the market as an AI loser, because today it arguably wears the crown as the strongest full-stack AI option in mega-cap tech, with chips, models, cloud infrastructure, consumer reach and advertising all pulling in the same direction.

“The biggest fear was that AI would disrupt Google Search, but the proof is in the pudding.

“Search growth has stepped up meaningfully, and investors have flipped the script, from Search as the business most at risk from AI, to one of the clearest beneficiaries.

“Microsoft remains the cloud name markets are finding hardest to reward, with strong results initially punished before a sharp swing back towards neutral once management gave investors what they needed on the call – confidence that cloud growth still has legs.

“The key point is that Microsoft is still compute-constrained, meaning there is demand it simply cannot service today, and the stronger-than-expected Azure guide helped offset some of the noise around a shifting software landscape.

“That uncertainty still matters, especially as AI pushes parts of the industry from seat-based pricing towards more consumption-led models.

“But this is still a very high-quality business with an image problem rather than a demand problem, and it may just take more time for the market to give Microsoft credit for its long list of strengths.

“Amazon had its own sharp swing last night, with shares initially marked down because AWS growth, while strong, landed just shy of the punchier whisper numbers some investors were hoping for.

“That feels like splitting hairs, because 28 per cent growth versus hopes for something closer to 30 per cent still points to a cloud business in very good health, and the lack of a fresh capex raise was taken as a mild positive even as management stayed firmly bullish on the scale of the AI infrastructure buildout ahead.

“Like Microsoft, Amazon still lacks a little sparkle around its AI story outside the cloud, but that could be the opportunity: its huge e-commerce machine has plenty of ways to benefit, from agentic commerce to robotics behind the scenes, even if the market is still waiting for that wow moment.

“Meta simply cannot catch a break, and it is perhaps the clearest example from last night of the market treating “spending more” as an automatic negative, even when the underlying business is firing.

“The capex raise that helped trigger the after-hours sell-off looks relatively modest in context – what’s $10billion among friends when the top end of the guide has only moved from $135billion to $145billion, and Meta is already showing strong returns on the AI spend it has made so far?

“Investors are laser-focused on the cost side right now, but that risks missing the bigger picture.

“Advertising momentum is strong, AI is improving monetisation, and Meta still looks like one of the clearest examples of heavy investment translating into returns for its core business.”