Microsoft, Meta, and Google just announced billions more in AI spending. Only Google convinced investors it’s paying off

Alphabet, Meta Platforms, and Microsoft just broke the news to investors that they’ll be spending billions more on the AI race. But only some investors saw red in response. 

Meta’s stock dropped more than 6% after hours, while Microsoft was essentially flat. Conversely, the share price of Google parent Alphabet rose almost 7% in after-hours trading.

Investors have been on tenterhooks about capital expenditures among the big tech firms, with recent estimates showing combined capex related to AI will exceed $600 billion in 2026 alone. Analysts have been seeking more details from CEOs about when they expect to see a return on investment materialize, and markets are bruising companies if they don’t hear what they’re looking for from executives. 

At Alphabet, the clear differentiator came from Google’s Cloud growth. Chief Financial Officer Anat Ashkenazi said the company is seeing “unprecedented internal and external demand for AI compute resources.”

“The investments we’re making in AI are delivering strong growth as evidenced by the record revenue and backlog growth in Google Cloud and strong performance in Google Services,” Ashkenazi said. “Looking ahead, these strong results reinforce our conviction to invest the capital required to continue to capture the AI opportunity. As a result we expect our 2027 capex to significantly increase compared to 2026.”

AI capex spending gets revised upward

Alphabet raised its full year 2026 capex spending guidance to $180 billion to $190 billion, up from $175 billion to $185 billion. Alphabet’s Google Cloud revenue grew 63% year-over-year to $20 billion, more than doubling its growth rate. Ashkenazi said the enterprise cloud computing segment backlog is $462 billion, which nearly doubled this quarter compared to last quarter. She said Alphabet plans to see just north of 50% of that backlog turn into revenue over the next 24 months. 

Ashkenazi pointed to AI solutions paired with strong demand for Alphabet’s Gemini 3 model as being among the largest contributors to cloud’s growth. CEO Sundar Pichai said that paid monthly active users of Gemini Enterprise grew 40% over the last quarter, with deals at marquee brands like Bosch, Mars, and Merck. 

“We are seeing strong deal momentum, doubling the number of $100 million to $1 billion deals year-on-year and signing multiple $1 billion-plus deals,” Pichai said during the company’s call with analysts following the earnings release. “In Q1, revenue from products built on our GenAI models grew nearly 800% year-over-year.”

Over at Meta Platforms, which also announced results on Wednesday, CEO Mark Zuckerberg told investors the company plans to increase its capex spending to $125 billion to $145 billion, up from a previous range of $115 billion to $135 billion. When Zuckerberg was asked by an analyst to explain the signs he’s looking for that will tell him Meta is on a healthy path to a return on the significant investments it is making in AI, his response did not appear to soothe investors the way he might have hoped. 

“That’s a very technical question,” Zuckerberg responded. “The things that we’re watching are to make sure that we’re on track to building leading models and leading products. The formula for our company has always been to build experiences that can get to billions of people and focus on monetizing them once you get to scale.”

Alphabet’s cloud may be grabbing market share

Melissa Otto, head of Visible Alpha Research at S&P Global, said components and memory chips are very expensive and given the increases in capex, companies are willing to pay higher prices. 

However, Alphabet’s cloud business results were a “meaningful beat” because it indicates the business could be claiming market share from competitors. 

“It implies they’re in a strong competitive position,” said Otto. “You’ve got an emerging business line that is beating expectations in a pretty competitive environment and they are really seeing, I think, that scale come into their business in a pretty compelling way.”

Cloud revenues at Alphabet were $20 billion in the first quarter, while Amazon’s AWS reported $37.6 billion on Wednesday. Microsoft Cloud, which includes Azure, M365 Commercial cloud, and other services, reported $54.5 billion. However, Google’s growth rate was 63%, compared to 28% for AWS. 

Microsoft CFO Amy Hood said Azure and other cloud services grew 40%. Microsoft doesn’t break out a specific dollar figure for Azure; the metric sits within its Intelligent Cloud segment, which reported $34.7 billion in revenue. 

Microsoft, which also reported results on Wednesday, guided that fourth quarter capex would exceed $40 billion, and Hood said it expects to invest $190 billion in total this year. CEO Satya Nadella attributed about $25 billion of that to higher component pricing, similar to Meta. 

About two thirds of the spending is going to GPUs and CPUs, meeting Azure customer demand, and powering AI tools like M365 Copilot. Hood said even with this spending, Microsoft expects to stay capacity constrained through 2026. 

“We expect capex spend to increase to over $40 billion as we continue to bring more capacity online. The sequential increase includes roughly $5 billion from higher component pricing, as well as the impact from finance leases,” said Hood during her prepared remarks.

Hood compared the investments in AI to Microsoft’s cloud business, and said AI is traveling on a similar path, although the profit margins on AI products and tools are already better than cloud margins were at a similar stage.

“We’ve been talking about sort of where this AI business of ours has been in the cycle compared to even the cycle we saw with the cloud, which now seems very long ago,” said Hood. “And how margins were actually better. And they’ve remained better in our AI business versus what we saw in the cloud transition.”

This story was originally featured on Fortune.com