Meta and Alphabet are rising in the billions as the AI race shows no signs of slowing down.
Earlier this year, Meta, Amazon, Google and Microsoft jointly announced a massive $650 billion spending package as they ramped up their use of AI and the cloud, sending investors into a frenzy and slashing prices as a result.
This massive investment was expected to add $900bn to Amazon, Google and Microsoft’s combined market capitalisation.
Surprisingly, AI-related capital spending shows no signs of slowing down, with Big Tech giants Meta and Alphabet jointly announcing a capex bump of around $15bn.
“The public cloud revenue numbers are as big as ever, but the huge investment to get to them is huge quickly,” said Forrester principal analyst Lee Sustar. “That’s why questions will continue about the sustainability of hyperscaler AI data center architecture.”
Coins raise a total of $5bn
Google’s parent company Alphabet beat revenue expectations last quarter, led by its growing cloud business which rose 63pc to $20bn. Consolidated revenue grew by 22pc to almost $110bn.
Success in the cloud business has been revealed by the rise of Google Cloud Platform (GCP) across the enterprise AI Solutions, and the enterprise AI Platform, as well as key GCP services. Shares rose more than 6pc in after-hours trading.
Alphabet is adding an additional $5bn to its 2026 capex, taking it to around $180bn to $190bn for the year – up from the $175bn to $185bn previously announced. It reported $37.5bn in capex this quarter, spending that includes real estate, servers and data centers.
Gemini Enterprise has grown its monthly paid users by 40pc from the previous quarter. This was their strongest quarter ever recorded by Gemini App, CEO Sundar Photosi said in a press release.
Its home-grown suite of AI models under the Gemini wing processes more than 16bn tokens per minute through direct use of the API – up a staggering 60pc from the previous quarter.
Last week, the company made a series of new business-focused launches, including a new platform for building and managing AI agents and the latest generation of its AI-specific Tensor processing units. Google also committed up to $40bn to Anthropic last week, as the AI giant tries to overtake OpenAI for business users.
Meta pumps up the use of AI after a bunch of layoffs
Meta, meanwhile, forecast full-year capex of between $125bn to $145bn – up about 7.5pc from its previous estimated range of $115bn to $135bn. The capex for the quarter reached almost $20bn.
Meta said the increased budget is expected to help support the company as it faces higher prices this year, as well as additional data center costs.
The increased capex comes shortly after the company announced it would lay off around 10pc of its workforce, which comes to around 8,000 employees. The current number stands at 77,986 as of March 31, and the number is expected to drop as the next layoffs take place in late May.
Quarterly revenue at parent Facebook rose 35pc to more than $33bn, while second-quarter revenue is expected to be between $58bn and $61bn, Meta said. Shares fell more than 8pc in after-hours trading following the results.
CEO Mark Zuckerberg said the “historic quarter” shows momentum in all of its applications, as well as the launch of its first model under the Alexandr Wang-led Superintelligence Labs.
“Our biggest milestone so far this year has been the release of our Muse family of models and our first model, the Muse Spark, and the new, more advanced version of Meta AI.”
Microsoft is losing its OpenAI technology exclusivity
In a major blow to the company, the revised agreement revoked Microsoft’s exclusive access to OpenAI technology. OpenAI, on the other hand, quickly jumped to announce exclusive AI products with Microsoft’s cloud competitor, Amazon.
Chairman and CEO Satya Nadella, however, noted that Microsoft still has a lot to gain from OpenAI, which is the 27pc equity stake it has in the AI giant. Microsoft shares fell more than 5pc in pre-market trading.
“They are our biggest customers, not only on the AI accelerator side, but also on all the other sides of computing. So we want to serve them well. And of course, we have our equity,” he said.
Revenue at the company rose 18pc last quarter to almost $83bn, while cloud revenue was estimated at $54.5bn – marking industry growth of 29pc. Annual revenue was up 123pc at $37bn.
“We are focused on delivering cloud and AI infrastructure and solutions that empower all businesses to test their results in the computing era,” Nadella said.
Rapid growth of AWS from Q2 2022
Amazon Web Services (AWS) is growing exponentially due to massive cloud demands from the AI wave. AWS revenue rose 28pc to more than $37.5bn, the fastest in 15 places – or almost four years – with its top-chip businesses averaging $20bn in annual revenue.
Other major achievements this past quarter include a 2 GW deal with OpenAI for its Trainium capacity on AWS, and a similar 5 GW deal from Anthropic. The company is also investing $25bn in Anthropic.
The company also announced a collaboration with Nvidia’s upcoming Cerebras competitor, a deal with Uber for Graviton and Trainium chips, and a deal with Meta to deploy tens of millions of AWS Graviton cores for its AI operations. Shares in the company rose about 1.5pc in pre-market trading.
Like Meta, Amazon is also reducing some of its AI costs with major layoffs at the company. In January, it cut about 16,000 jobs, which followed a cut of about 14,000 jobs last October. Around 450 Irish jobs are understood to have been affected.
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