Wall Street's immediate response to quarterly financial results from four of the world's biggest companies gives a glimpse into how investors feel about the massive sums getting spent on artificial intelligence networks.
Profits from the AI divisions of Google parent Alphabet and e-commerce titan Amazon sent shares for both firms up 7% in after-hours trading. Meta and Microsoft, despite posting earnings that beat expectations, saw their shares slip as stockholders await further signs of proof that costly data center buildouts can generate earnings.
Despite the differing results, all four firms intend to spend a record combined $680 billion this year alone on AI networks, including real estate.
Patrick Moorhead, chief analyst with Moor Insights & Strategy, said these companies aren't just throwing out cash; they're spending to deliver on demand "to keep this AI party going," he told CNBC.
Alphabet said its Gemini artificial intelligence business line that launched in October expanded its roster of paid monthly active users 40% quarter over quarter — proving that its AI platforms are able to turn a profit.
Meanwhile, gains from Microsoft's cloud computing unit and AI applications helped the company boost its revenue by 18% — but it wasn't enough to buoy the firm's stock price. Some analysts said the firm has struggled to get data center capacity online quickly enough to fully capitalize on demand.
Investing in the opportunity
Google’s parent company, Alphabet, boosted its planned spending this year to between $180 billion and $190 billion — up from the prior estimate of $175 billion to $185 billion, as the search giant positions itself alongside Microsoft and Amazon in an AI infrastructure arms race.
Google CEO Sundar Pichai said the firm's cloud revenue "would have been higher" if the firm had more processing power generated by data centers. He framed data centers, chips and networking as the “foundation” of the company’s “full-stack” AI strategy.
“We are compute-constrained in the near term,” Pichai said on the earnings call.
Amazon’s capital spending jumped to $44.2 billion in the quarter as the Seattle-based tech giant stuck to projections that it will pour $200 billion into capital expenditures in 2026, the highest of all the major tech firms.
The company's shares rose in part due to 28% revenue growth from Amazon Web Services to $37.6 billion for the first quarter — its fastest quarterly growth in more than three years — as the firm added data center capacity and saw increasing business from partners Anthropic and OpenAI.
"We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow," Amazon Chief Financial Officer Brian Olsavsky told analysts.
Optimizing tech spending
Microsoft, meanwhile, saw a 39% revenue gain for its Azure cloud computing unit, while 20 million customers are now paying for Copilot, the company’s flagship AI application, up from 15 million in the prior quarter. The gains helped push Microsoft to about $83 billion in revenue in the first quarter, up 18% from the prior-year period and outpacing the $81.4 billion estimated by analysts.
Still, Microsoft stock dipped about 1.1% on Wednesday in after-hours trading, and the firm’s shares have fallen about 12% this year due to investor concerns about the company’s investments in data centers and artificial intelligence. Microsoft held to plans for about $190 billion in capital expenditures for the full year.
In total, Microsoft added another gigawatt of data center power in the quarter and remains on track to double its data center property in less than two years, according to CEO Satya Nadella said.
The moves will boost revenue for the firm’s Azure cloud computing service and Copilot AI app, executives said.
“We're optimizing every layer of the tech stack,” Nadella said during the firm’s earnings presentation. “This is translating into operational gains.”
Meta, parent company of social media giants Facebook, Instagram and WhatsApp, raised its full-year projection for capital spending to between $125 billion and $145 billion, compared with its prior forecast of $115 billion to $135 billion.
Meta executives said the Mountain View, California-based firm's increased spending is tied to higher prices for chips and other components and higher data center development costs. Even with those added costs, Meta CEO Mark Zuckerberg sees AI as being the future.
"I think AI will amplify people's ability to do what they want," Zuckerberg said during the earnings call. "This will help people reach their individual aspirations. People will be more important in the future, not less, with AI empowering individuals."
Meta’s stock shares fell in after-hours trading by more than 6%.