Following the latest round of Big Tech earnings, Microsoft, Alphabet, and Amazon stand out with strong results that exceeded market expectations. We view Big Tech’s sustained capital intensity as a key positive for the tech sector, with street consensus forecasting 2026 CapEx to reach USD 730–780 billion (+77% YoY). What sets these three hyperscalers apart is that their robust top-line growth sufficiently justifies their Capex. Furthermore, following a prolonged period of consolidation, these names offer compelling valuations relative to semiconductor peers, which are currently digesting their strong rally over the past few months.
Monetization is the Key
Going forward, the Big Tech’s upside will be underpinned by tangible progress in AI monetization. Disciplined capital deployment alongside clear monetization traction will be the critical differentiators separating these three leaders from the rest of the peer group.
Investors particularly welcomed several key catalysts from the latest earnings reports:
1. Microsoft: Defensible CapEx via Azure Acceleration
- Capacity-Constrained Cloud Growth: Azure and cloud revenue growth re-accelerated at 40% y-o-y, reassuring investors that data center CapEx is met with overwhelming enterprise demand rather than speculative overbuilding.
- Enterprise AI Adoption: Commercial momentum around Copilot and generative AI services demonstrated clear revenue conversion, proving that AI investments are translating into high-margin subscription revenue.
2. Amazon: Record AWS Re-acceleration & In-House Chips
- AWS Re-ignition: AWS net sales surged 37% y-o-y, representing its fastest growth in over four years. It alleviates market’s fear on Amazon lagging behind peers in cloud AI workloads.
- Custom ASIC Monetization: Amazon’s proprietary silicon (Trainium 2/3) and AI offerings both surpassed USD25bn annualized revenue run-rates, showcasing its elevated CapEx directly funding the high-margin and sticky enterprise demand.
3. Alphabet: Search Resilience & Cloud Backlog Expansion
- AI-Enhanced Core Search: Integration of AI Search Overviews and smart ad targeting re-energized top-line advertising growth, disproving concerns that generative AI would cannibalize legacy search revenue.
- Expanding Cloud Backlog & TPU Efficiency: Google Cloud showed accelerating momentum and massive backlog expansion, supported by broader adoption of custom TPU v8 clusters that help protect operating margins amid rising hardware costs.
Insights from the Tape
For tape readers, the results from Microsoft and Amazon present a classic Episodic Pivot – a technical pattern similar to what was observed in April with Intel and Bloom Energy. Beyond offering an entry point with favorable risk-reward, this setup provides a valuable window to gauge broader market sentiment and assess whether these post-earnings pivots sustain momentum or fade over the coming sessions.
Lastly, Palantir (PLTR) offers a notable observation following its quarterly report released yesterday (US after-market), which sent shares soaring 17% in current pre-market. It reported an upbeat EPS (USD0.41 vs consensus USD0.35) while revenue (+93% y-o-y) topped market estimates (USD1.94bn vs consensus USD1.81bn). PLTR is a leading enterprise software name – its massive guidance raise for full year signals corporates are expanding discretionary software budgets for operational productivity tools. Whether the stock maintains this momentum once regular trading opens will serve as a crucial test for underlying market risk appetite.
The information provided in this note is for educational and informational purposes only and does not constitute financial, investment, or professional advice.
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