Microsoft, Meta, Apple, and Amazon report earnings this week, with investors prioritizing evidence that record AI spending is generating revenue over traditional profit metrics. Alphabet established the benchmark on July 22 when its shares fell roughly 4% after hours despite beating nearly every line, penalized for raising full-year capital spending guidance toward $205 billion. The search giant posted second-quarter revenue of $119.8 billion, a 24% annual increase, with diluted earnings reaching $9.11 a share and Google Cloud revenue climbing 82% to $24.8 billion. Management raised 2026 capital expenditure guidance to a range of $195 billion to $205 billion from a prior ceiling of $190 billion. Quarterly capital spending hit $44.9 billion, roughly double the year-earlier figure, while free cash flow turned negative at $5.9 billion, establishing a new market test where revenue beats no longer protect stocks if spending guidance rises faster.
Alphabet Sets Earnings Benchmark with Capital Spending Increase
Alphabet's July 22 results reset Big Tech earnings expectations. The company posted second-quarter revenue of $119.8 billion, a 24% annual increase, with diluted earnings reaching $9.11 a share. Google Cloud revenue climbed 82% to $24.8 billion. The stock dropped roughly 4% after hours following management's decision to raise 2026 capital expenditure guidance to a range of $195 billion to $205 billion. The prior range topped out at $190 billion. Quarterly capital spending hit $44.9 billion, roughly double the year-earlier figure. Free cash flow turned negative at $5.9 billion. That combination represents the new market test, where beating on revenue no longer protects a stock if spending guidance rises faster.
Big Tech Cash Flow Statements Reveal AI Spending Acceleration
Recent quarterly cash flow statements for Microsoft, Meta, Apple, Amazon, and Alphabet show capital spending growing far faster than the cash generated to fund it. Microsoft provides the clearest example. Additions to property and equipment reached $30.9 billion in the March quarter, up 84% from $16.7 billion a year earlier, according to its filing. Operating cash flow grew far more slowly. Subtracting capital spending, the remainder fell 22% to $15.8 billion, even though net income rose 23%. Depreciation tells the same story. Microsoft's depreciation and amortization charge rose 31% to $10.2 billion. Meta's climbed 54% to $6.0 billion. Microsoft spent $80.1 billion on property and equipment across the first nine months of its fiscal year, up 69% from $47.5 billion. Amazon shows the sharpest deterioration. Trailing free cash flow fell to $1.2 billion from $25.9 billion a year earlier. The company attributed the drop to a $59.3 billion rise in equipment purchases. Combined Big Tech AI capex guidance for 2026 runs into the hundreds of billions. Azure grew 40% last quarter, Google Cloud 82%, and Amazon Web Services 28%.
Meta and Amazon Report Tax Benefits and Investment Gains in Headline Earnings
Meta and Amazon posted headline profits last quarter that included items unrelated to operations. Meta reported diluted earnings of $10.44 a share. That figure included an $8.03 billion income tax benefit. The company disclosed that earnings would have been $3.13 lower without it. Stripping the benefit, Meta earned closer to $7.31 a share. Wednesday's consensus of $7.13 therefore represents a normal comparison rather than stagnation. Amazon reported $2.78 a share. That number included $16.8 billion in pre-tax gains from its Anthropic investment. Operating performance at these companies is harder to read from headline earnings. Investors are watching capital spending instead, because that line is unambiguous.
Microsoft Reports Azure Growth Against Rising Capital Expenditure
Microsoft closes its fiscal year on Wednesday. Zacks Investment Research puts consensus at $4.21 a share across 15 analysts, against $3.65 a year earlier. Azure decides the reaction. The unit grew 40% last quarter. Management guided to constant-currency growth of 39% to 40% for the June period. Commercial remaining performance obligation, essentially contracted future revenue, nearly doubled to $627 billion. Chief Executive Satya Nadella said Microsoft's AI business passed a $37 billion annual revenue run rate.
Meta Faces Expense Scrutiny with Reality Labs Losses
Meta guided to full-year costs of $162 billion to $169 billion and capital expenditure of $125 billion to $145 billion. Reality Labs lost $4.03 billion last quarter alone. The core business is compounding quickly. Revenue rose 33% to $56.31 billion last quarter, of which advertising contributed $55.02 billion. An average of 3.56 billion people used its apps each day in March. Meta disclosed a new data center venture with BlackRock in El Paso on Tuesday.
Apple Demonstrates Capital-Light Growth Model
Apple represents the capital-light outlier. Analysts expect $1.88 a share, up from $1.57, on consensus revenue of roughly $109 billion. Its March quarter showed capital-light growth. Revenue rose 17% to $111.2 billion and earnings per share climbed 22%, according to Apple's release. Services reached an all-time high. Apple generated more than $28 billion in operating cash flow that quarter. Rather than building data centers, it authorized a further $100 billion of share buybacks. Thursday marks Tim Cook's final earnings call as chief executive. John Ternus takes over on September 1.
Amazon Web Services Delivers Fastest Growth in 15 Quarters
Amazon reports at $1.81 a share, against $1.68. Analysts model roughly $40.5 billion in Amazon Web Services revenue. Company guidance puts operating income between $20 billion and $24 billion. AWS delivered $37.6 billion of revenue and $14.2 billion in segment operating income last quarter, its fastest growth in 15 quarters. Amazon's custom chips business, spanning Graviton, Trainium, and Nitro, passed a $20 billion annual revenue run rate. Analysts model AWS margin at 33.8%.
Federal Reserve Rate Decision Precedes Wednesday Earnings
The Federal Reserve announces its rate decision on Wednesday afternoon, hours before Microsoft and Meta report. Rates currently sit between 3.50% and 3.75%. Economists broadly expect no change. Traders disagree, and futures pricing splits sharply on the odds of a hike. On April 30, Alphabet added more than $300 billion in market value. Meta shed $175 billion in the same session. Both had beaten on revenue. Only their spending outlooks differed. Options markets imply a move of roughly 6.3% for Amazon on results day, above its recent average. Similar volatility is priced across the other three.
FAQ
What did Alphabet report on July 22 that caused its stock to drop?
Alphabet posted second-quarter revenue of $119.8 billion and diluted earnings of $9.11 a share, beating nearly every line. The stock dropped roughly 4% after hours because management raised 2026 capital expenditure guidance to a range of $195 billion to $205 billion from a prior ceiling of $190 billion. Quarterly capital spending hit $44.9 billion, roughly double the year-earlier figure, while free cash flow turned negative at $5.9 billion.
How much did Microsoft spend on property and equipment in the March quarter?
Microsoft's additions to property and equipment reached $30.9 billion in the March quarter, up 84% from $16.7 billion a year earlier, according to its filing. Across the first nine months of its fiscal year, Microsoft spent $80.1 billion on property and equipment, up 69% from $47.5 billion.
What is the consensus earnings expectation for the four companies reporting this week?
Analysts expect Microsoft at $4.21 a share against $3.65 a year earlier. Meta's consensus stands at $7.13 a share. Apple is expected at $1.88 a share, up from $1.57. Amazon is modeled at $1.81 a share, against $1.68, with roughly $40.5 billion in Amazon Web Services revenue.
