Meta and Alphabet are bumping up capex by billions as the AI race shows no signs of slowing down.
Earlier this year, Meta, Amazon, Google and Microsoft collectively announced a massive $650bn capital expenditure package as they ramped up their AI and cloud spending, sending investors into a frenzy and driving share prices down as a result.
These massive investments were expected to cause $900bn in collective damages to Amazon, Google and Microsoft’s market capitalisation.
Surprisingly, AI-related capital expenditure are showing no signs of slowing down, with Big Tech giants Meta and Alphabet collectively announcing a capex bump of about $15bn.
“The public cloud platform earnings numbers are big as usual, but the capital investment to achieve them are getting big faster,” said Forrester’s principal analyst Lee Sustar. “That’s why questions will persist about the sustainability of hyperscaler AI data centre buildouts.”
Alphabet drives capex up $5bn
Google’s parent company Alphabet beat revenue expectations this past quarter, led by its growing cloud business which rose 63pc to hit $20bn. Consolidated revenue grew 22pc to nearly $110bn.
Success in the cloud business is attributed to a rise in Google Cloud Platform (GCP) across enterprise AI Solutions, and enterprise AI Infrastructure, as well as the core GCP services. Shares are up more than 6pc in after-hours trading.
Alphabet is adding an estimated $5bn extra to its 2026 capex, taking it to around $180bn to $190bn for the year – up from the $175bn to $185bn it previously announced. It reported $37.5bn in capex during this quarter, spending which includes real estate, servers and data centres.
Gemini Enterprise grew its paid monthly active users by 40pc from the previous quarter. This was their strongest quarter ever on record driven by the Gemini App, CEO Sundar Pichai said in a press release.
Its home-grown series of AI models under the Gemini wing is processing more than 16bn tokens per minute via direct API use – up a staggering 60pc from the previous quarter.
Last week, the company made a series of new enterprise-focused launches, including a new platform to build and manage AI agents and the latest generation of its AI-specific Tensor Processing Units. Google also committed up to $40bn to Anthropic this past week, as the AI giant attempts to overtake OpenAI in enterprise users.
Meta pumps AI spending after mass layoffs
Meta, meanwhile, projected a full-year capex of between $125bn to $145bn – up around 7.5pc from its previous estimated range of $115bn to $135bn. Quarterly capex reached nearly $20bn.
Meta said that the expanded budget is expected to help support the company as it navigates higher component pricing this year, as well as additional data centre costs.
The pumped up capex comes just after the company announced that it is laying off about 10pc of its headcount, coming to around 8,000 employees. Current headcount stands at 77,986 as of 31 March, with the number expected to go down as the upcoming layoffs materialise in late May.
Quarterly revenue at the Facebook-parent is up 35pc to more than $33bn, while second quarter revenue is expected to be in the range of $58bn to $61bn, Meta said. Shares are down more than 8pc in after-hours trading following the results.
CEO Mark Zuckerberg said that the “milestone quarter” reflects momentum across its apps, 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, Muse Spark, along with a significantly upgraded new version of Meta AI.”
Microsoft loses OpenAI tech exclusivity
In a major blow to the company, a revised deal has revoked Microsoft’s exclusive access to OpenAI’s tech. OpenAI, meanwhile, immediately jumped to announce exclusive AI products with Microsoft’s cloud rival, Amazon.
Chairperson and CEO Satya Nadella, however, noted that Microsoft still has much to gain from OpenAI, namely the 27pc equity stake it has in the AI giant. Microsoft shares are down more than 5pc in pre-market trading.
“They’re a large customer of ours, not just on the AI accelerator side, but also on all the other compute sides. And so we want to serve them well. And then, of course, we have our equity,” he said.
Revenue at the company is up 18pc this past quarter to around $83bn, with cloud revenue accounting for around $54.5bn – marking a sectoral growth of 29pc. Annual revenue run rate is up 123pc at $37bn.
“We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era,” Nadella said.
Fastest AWS growth since Q2 2022
Amazon Web Services (AWS) is growing at an exponential rate thanks to the massive cloud requirements stemming from the AI wave. AWS revenue is up 28pc to more than $37.5bn, its fastest in 15 quarters – or nearly four years – with its chip businesses topping a $20bn annual revenue rate.
Other major achievements this past quarter include a 2 GW deal with OpenAI for its Trainium capacity through AWS, as well as a 5 GW deal for the same from Anthropic. The company is also investing $25bn into Anthropic.
The company also announced a collaboration with up and coming Nvidia rival Cerebras, a deal with Uber for its Graviton and Trainium chips, as well as a deal with Meta to deploy tens of millions of AWS Graviton cores for its AI workflow. Shares at the company are up around 1.5pc in pre-market trading.
Much like Meta, Amazon is also offsetting some of its AI expenses with massive layoffs at the company. In January, it cut about 16,000 jobs, which followed about 14,000 job cuts last October. Around 450 Irish jobs are understood to have been affected in this move.
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