Earnings outperformance tempts pensions even as future payoffs stay uncertain
Artificial intelligence is delivering some of the fastest earnings growth in global equities – and forcing investors to decide how much balance‑sheet risk they will tolerate in a handful of mega‑cap “hyperscalers.”
According to CNBC and company releases, Microsoft, Alphabet, Amazon, and Meta Platforms all beat revenue expectations and posted double‑digit growth, but markets rewarded them unevenly as AI‑driven capex soared and guidance diverged.
Microsoft reported adjusted earnings per share of US$4.27 versus US$4.06 expected and revenue of US$82.89bn versus US$81.39bn expected, with revenue up 18 percent year over year in the quarter ended 31 March.
Net income rose to about US$31.8bn, and operating income increased 20 percent to US$38.4bn.
Microsoft said Microsoft Cloud revenue reached US$54.5bn, up 29 percent, with Intelligent Cloud revenue of US$34.7bn and Azure and other cloud services up 40 percent.
Alphabet reported earnings per share of US$5.11 and revenue of US$109.9bn, beating the US$107.2bn consensus and growing 20 percent from last year.
Google Services revenue rose to US$89.6bn, while Google Cloud revenue increased 63 percent to about US$20bn, leading to Alphabet’s strongest quarterly growth rate since 2022.
Net sales at Amazon increased 17 percent to US$181.5bn, versus US$177.30bn expected.
North America segment sales rose 12 percent to US$104.1bn, International sales increased 19 percent to US$39.8bn, and Amazon Web Services segment sales grew 28 percent to US$37.6bn, marking AWS’s fastest growth in more than three years.
Meta said revenue climbed 33 percent to US$56.31bn from US$42.31bn a year earlier, beating the US$55.45bn estimate.
Net income jumped to US$26.8bn, or US$10.44 per share, helped by an US$8.03bn income tax benefit linked to changes in US tax rules for research and development.
Markets reacted sharply.
CNBC reported Meta shares fell about 7 percent in extended trading after lower‑than‑expected quarterly capex and weaker user growth, even as revenue beat.
Alphabet’s shares rose more than 6 percent and are up about 21 percent this month, according to CNBC, helped by perceptions that Google Cloud is taking share.
Amazon gained roughly 3 percent to 4 percent after hours on the back of its AWS and advertising results, while Microsoft’s stock was little changed despite the earnings beat and 40 percent Azure growth.
Behind those numbers sits an AI infrastructure arms race.
Microsoft told investors its capital expenditures for the year will reach US$190bn because of soaring memory costs.
The company reported US$31.9bn in fiscal third‑quarter capex and finance leases, up 49 percent year over year and below the US$34.9bn Visible Alpha consensus, while gross margin narrowed to 67.6 percent as depreciation from data‑centre build‑outs mounted.
Amy Hood said a 2026 capex figure of US$190bn would be 61 percent higher than in 2025 and includes a US$25bn impact from higher component prices.
Alphabet raised its 2026 capital expenditure guidance to a range of US$180bn to US$190bn, from US$175bn to US$185bn, and reported US$35.7bn of quarterly capex across real estate, servers, data centres and other infrastructure.
Chief financial officer Anat Ashkenazi said 2027 capex will “significantly increase” compared with 2026.
Amazon previously projected capital expenditures of about US$200bn in 2026, largely to support AI infrastructure, and said first‑quarter free cash flow fell to US$1.2bn over the trailing 12 months as purchases of property and equipment rose by roughly US$59.3bn, driven primarily by AI investments.
Meta, by contrast, reported first‑quarter capex of US$19.84bn, below the US$27.57bn StreetAccount estimate, but now expects 2026 capex of US$125bn to US$145bn, up from US$115bn to US$135bn, due to higher component prices and added data‑centre costs for future capacity.
Reuters reported that analysts at Barclays expect capital spending by the four hyperscalers plus Oracle to rise from 50 percent of operating cash flow in 2024 to nearly 90 percent by 2027.
Walter Todd at Greenwood Capital told Reuters that if these companies temper spending, it would likely trigger “a very negative reaction, at least in the short term, in the whole basket of AI names.”
Noah Weisberger at BCA Research told Reuters investors may not give them more than “a year” to show that this capex is turning into revenue growth and cash.
