Susana SchwartzIs Wall St. is saying 'show me the money'?
Investors are showing less tolerance to some of the enormous financial bets being placed on AI infrastructure by hyperscalers.
In yesterday’s earnings reports from Alphabet and Microsoft, and a week prior from Meta, there were signs of health and growth, but apparent reluctance by investors to reward companies whose capex drove free cash flow into negative territory before showing clear, core revenue payoffs.
After yesterday’s earnings calls, Alphabet and Meta stocks went down, but Microsoft, for the moment, avoided punishment because it showed Azure cloud growth accelerated by 48%, with $33.2 billion in revenue.
For Q1 FY27, Microsoft reached $92.3 billion in revenue (+19%) and reported a 32% net income surge to $36.6 billion. Its quarterly capex was ~$39.4 billion cash, with an expected annual capex of $190 billion.
Alphabet reported $127.6 billion in revenue(+25%) and $51.36 billion in quarterly capex, while Meta reported $64.6 billion (+26%) in revenue, with ~$35 Billion in quarterly capex.
As the market looked at the reported capex targets, a ripple effect could be seen in neoclouds, whose stocks took a hit after the earnings reports. These companies, after all, are fundamentally tethered to hyperscalers’ capex.
Susana Schwartz
Technology Editor
RCRTech
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