Here’s what we learned from last week’s big tech earnings

Earnings season kicked into high gear last week when five members of the Magnificent Seven with a combined market cap of more than $15 trillion reported their results.

The tech giants — Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and Meta (META) — reported better-than-expected results across the board and predicted their massive investments in artificial intelligence will grow in the coming year.

Below, we take a closer look at some of the key takeaways from this round of big tech earnings.

There is no slowdown in investment in AI in sight

One thing that was made clear on earnings calls last week is that hyperscalers’ AI investments show no signs of abating.

Amazon on Thursday raised its full-year capital expenditure forecast and said investments will increase next year. Alphabet also raised capital expenditure guidance for the third time this year and expects another “significant” increase next year. Microsoft did not share quarterly or full-year capex estimates, but CFO Amy Hood said investments will grow faster in fiscal 2026 than in 2025.

Executives stressed that despite their heavy investments to this point, they expect demand to continue to outpace supply next year. Microsoft’s cloud computing platform, Azure, will likely bear the brunt of its capacity constraints, according to Hood, who said the company has had to prioritize other core business offerings. She, like Meta CEO Mark Zuckerberg, also said her internal AI teams needed more computing power.

Citi analysts said in a note Thursday that they expect cloud data center capital expenditures to grow 24% in 2026, which should be a boon for semiconductor manufacturers such as Nvidia (NVDA), Broadcom (AVGO) and Advanced Micro Devices (AMD).

Not all spending on AI is good news

Spending on data centers is a good thing on Wall Street, as long as investors realize that increased profits will make it worthwhile.

Shares of Meta fell on Thursday after the company reported earnings that beat estimates due to a one-time tax charge, and raised its minimum capital expenditures guidance for the full year. Meta also said it expects its capital expenditure growth to accelerate next year.

“The real focus coming out of earnings is the updated meta view on capex and expenses for 2026 as the company looks to build an industry-leading amount of computing,” JPMorgan analysts told clients in a note on Thursday. “Meta’s costs are very large compared to Google and Amazon, as these are larger companies and both have cloud businesses that provide an immediate path to monetization for Gen AI, unlike Meta,” they said.

Rising operating costs have added to Wall Street’s concerns about Meta’s spending on artificial intelligence. Total expenses rose 32% year-on-year in the third quarter, compared to 12% in the previous quarter, and are expected to grow even faster next year.

Employee compensation was one of the largest contributors to higher expenses. Meta went on an AI hiring spree this year, making headlines for poaching top talent with eye-popping pay packages. This has put increased pressure on Meta to find ways to reduce costs. Recent reports of layoffs, including in the artificial intelligence division, could indicate some signs of tension in Meta’s efforts to keep its spending under control.

Artificial intelligence may change business in surprising ways

In the first round of the AI ​​craze on Wall Street, Alphabet was often seen as a laggard in this area. Its Bard chatbot flopped in its first public offering, and analysts worried that the growing popularity of chatbots from startups like OpenAI, Anthropic, and Perplexity could lead to significant disruption to Google’s core search business. However, Alphabet’s strong quarterly results — thanks in part to its AI search features — would contradict that narrative.

According to executives, Google’s AI search features, AI Looks and AI Mode, are helping to increase search query volume, which is the opposite of what Wall Street expected. Google’s search revenue growth has accelerated over the year, rising from 10% to 12% in the second quarter, then to 15% in the third quarter. Google monetizes AI search queries at roughly the same rate as traditional search, the executives added.

“Search acceleration (paid clicks up 7% vs. 4% in Q2) despite strong growth in OpenAI usage, suggests AI is expanding the end-to-end ‘information’ opportunity, driving higher query volume and improved monetization,” Bank of America analysts wrote in a note Thursday.

Executives are not concerned about concentration risks

Some investors have become concerned in recent months that the AI ​​boom is being fueled by a few companies making very large deals.

For example, OpenAI accounted for almost all of Oracle’s (ORCL) massive cloud computing backlog last quarter, and Nvidia said in its latest earnings report that two direct customers accounted for nearly 40% of its quarterly sales.

But Microsoft executives sought to allay concerns about concentration risks during an earnings call on Wednesday. When asked about the scope of contracts contributing to Microsoft’s backlog, which has grown 51% to $392 billion, CFO Amy Hood said: “It covers a lot of products. It covers customers of all sizes.”

CEO Satya Nadella also noted that he sees increasing demand related to AI over time, telling analysts that “concentration risks are mitigated by thinking about how to ensure that the build is targeted to the broad customer base.” The broader institutional accreditation cycle is “just beginning,” he said.