Big tech earnings: Hyperscaler growth rates impress, but concerns remain over surging infrastructure capex

Hyperscaler cloud revenues are still surging, according to recent earnings reports, but questions still remain about how much longer they can continue investing massive sums in AI infrastructure.

Alphabet, AWS, Meta, and Microsoft have all posted positive results this quarter with overall revenue in the hundreds of billions of dollars, helped in part by booming demand for data center capacity amid the AI roll-out.

However, analysts have questioned whether spending on AI is sustainable and will deliver a return on investment (ROI).

The current estimate is for tech's leading companies to invest $600 billion in infrastructure to power AI this year alone, with some tech giants already upping their predicted spends as part of their quarterly results.

"The public cloud platform earnings numbers are big as usual — but the capital investment to achieve them are getting big faster," said Forrester’s principal analyst Lee Sustar. "That's why questions will persist about the sustainability of hyperscaler AI data center buildouts."

"Together, the public cloud revenue numbers and the capital expense figures will raise questions about the sustainability of the AI boom," he added. "But with the potential payoff of AI leadership seemingly so high, the companies continue to make those bets, forcing investors and customers alike to assess how their interests are impacted."

According to LSEG data shared by Reuters, Amazon stock is up 13%, Alphabet's is up just shy of 12%, and Meta is up 3% – but Microsoft has slid 12%.

Alphabet's cloud success

Google-owner Alphabet saw overall revenue leap 22% to $109.9 billion for its first quarter, topping estimates, with income climbing to $39.7 billion.

Google Cloud climbed 63% to $20 billion, marking the best growth rate for the cloud company in more than six years, though still below Alphabet's other revenue sources, including Services at $89.6 billion and Search at $60.3 billion.

Google Cloud income climbed from $2.2 billion in the first quarter in 2025 to $6.6 billion this year, underlining significant growth over the last 12 months. Sustar said the figures show the cloud division "can significantly contribute to the wider Alphabet portfolio after years of big operating losses".

In an investor call, Sundar Pichai said that capacity constraints prevented even higher growth, with Google Cloud's backlog doubling to $460 billion.

"Our enterprise AI solutions have become our primary growth driver for cloud for the first time," he said.

In a statement, Pichai added: "Our first-party models, like Gemini, are now processing more than 16 billion tokens per minute via direct API use by our customers, up 60% from last quarter. It’s really exciting to see how our AI investments are delivering value for our users, customers and business."

CFO Anat Ashkenazi said Google would increase its capital expenditure forecast by $5 billion to somewhere between $180 billion and 190 billion. Last year, the tech giant’s capital expenditure reached $91.45 billion, with much of this focused on AI-related spending.

That huge cloud backlog and leap in revenue suggests that Google's capex spending isn't wildly out of place, Thomas Monteiro, a senior analyst at Investing.com, told Reuters.

"Perhaps even more importantly than Alphabet's massive cloud growth pace is the broader justification that the $180 billion capex plan — that surprised the market last quarter — is well within the company’s spending power, considering the durability and quality of the revenue curve shown today," he said.

But concerns remain, according to Sustar, who pointed to the quarterly figures. He noted that "the capital expenditure of $35.7 billion — which Alphabet attributes largely to AI — is much bigger" than the $20 billion in quarterly revenue from the cloud unit.

AWS leaps ahead, but not quite as much

Amazon's overall revenue climbed 17% to $181.5 billion in the first quarter, while revenue at Amazon Web Services (AWS) climbed 28% to $37.6 billion in the first quarter. AWS operating income climbed to $14.2 billion from $11.5 billion in the same quarter last year.

While AWS’ revenue growth rate wasn't as high as Google Cloud's, it's still significant coming from the market leader. Andy Jassy, CEO of Amazon, said in a statement that it was AWS' "fastest growth in 15 quarters."

Jesse Cohen, senior analyst at Investing.com, said that the "reacceleration" in AWS sales was a positive sign, adding that the hyperscaler’s customer base is "fully embracing new workloads, especially in AI."

Amazon has projected $200 billion in capex this year, with $44.2 billion spent in this quarter.

"AWS bagged $37.59 billion in revenue in the first quarter but data center buildouts accounted for a big part of the $44.2 billion capital investment in the same period, even though AWS had an operating income of $14.2 billion," said Sustar.

"That puts pressure on AWS to keep up its historic role of keeping Amazon as a whole in the black from quarter to quarter.

Social media props up Meta

Facebook owner Meta posted revenue of $56.3 billion, up 33% from $42.3 billion the same quarter last year, with income of $22.8 billion, up about 30%.

Meta raised its expected capital expenditure forecast from between $115 billion-$135 billion to $125 billion-$145 billion, which sent stocks sliding 6%.

In a statement, Meta said: "This reflects our expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity."

In a conference call, Meta's chief financial officer Susan Li said that such spending was necessary to catch up, as Meta has previously "underestimated our compute needs".

CEO Mark Zuckerberg said it was unclear how the increased spending would pay off.

"I don't think we have a very precise plan for exactly how each product is going to scale or anything like that," he said, per reports from the BBC.

"But I think we have a sense of the shape of where these things should be... and I'm quite comfortable that the lab we're building is on track to be a leading lab in the world."

In the meantime, social media continues to pay Meta's bills.

“The irony is that Meta’s future‑facing AI ambitions are being underwritten almost entirely by the company’s legacy business: advertising inside social media apps," said Forrester’s VP research director Mike Proulx. "There’s no material AI revenue yet. Reality Labs remains a loss. Muse Spark has momentum, but not monetization."

“The question is whether Meta’s core can continue to act as a cash cow while the company reduces headcount and diverts focus toward AI," he added.

"If Meta’s ad engine slows, the market’s margin for patience shrinks fast. Meta’s slight dip in daily active users is already beginning to raise eyebrows. Q2 will tell us if it’s really just a blip or the start of a trend."

Microsoft says margins are strong

Microsoft said its quarterly revenue was up 18% to $82.9 billion, with operating income up 20% to $31.8 billion, though AI spending helped cash flow slip by $6 billion to $15.8 billion.

"We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era," said Satya Nadella, Microsoft CEO.

"Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year."

Microsoft Cloud revenue climbed 29% to $54.5 billion, with Azure and other cloud services up 40%.

"For its part, Microsoft claims an upswing of 40% growth in Azure and $54.5 billion in revenue for the wider Microsoft Cloud category," said Forrester's Sustar.

"The company does not break out Azure operating revenue, but with its AI-focused capital investments of $31.9 billion, the cloud revenue is clearly expensive to obtain."

Microsoft's spending on AI has raised concerns, but the company pushed back saying income remains strong. "The margins have been and remain better in our AI business than when we were in our cloud transition," said CFO Amy Hood.

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