Alphabet, Microsoft, Amazon and Meta earnings put AI spending in focus

In short: Four of the biggest US tech companies are reporting quarterly results, and investors are focused on how much they are spending on AI and what they are getting back.

What's going on

Alphabet, Microsoft, Amazon and Meta are set to report their first-quarter results on April 29. Together, these companies make up almost one fifth of the S&P 500 by market value, which means their results can sway the wider US stock market.

Investors are paying close attention to their plans for “capital expenditure,” which is money spent on big long term items like buildings and equipment. In this case, that mostly means building data centres (large buildings full of computers) and buying high end chips to train and run AI systems.

The Financial Times notes that three months ago, the four companies outlined plans to spend about $660 billion on these investments this year. Analyst forecasts also point to large near term spending for the quarter, including expected capex of about $41.5 billion for Amazon, and about $36 billion each for Alphabet and Microsoft, with Meta expected at about $27 billion.

Expectations for growth are also high. FactSet analyst estimates cited by the FT put first quarter revenue at about $177.3 billion for Amazon, $106.9 billion for Alphabet, $81.4 billion for Microsoft, and $55.6 billion for Meta, with year on year growth estimates ranging from about 13.9 percent to 31.3 percent.

What to watch

The key question is whether the companies can show that this spending is paying off, like buying more delivery vans and warehouses and then proving packages arrive faster and profits improve. Watch their cloud businesses in particular, since many AI services run on rented computing power from Amazon, Microsoft, and Google.

Source: Financial Times