Microsoft, Alphabet, and Amazon: Earnings previews

Upcoming earnings previews for Microsoft, Alphabet, and Amazon indicate robust revenue expectations, largely driven by their respective cloud segments, with Microsoft's Intelligent Cloud and Alphabet's Cloud showing strong growth and improving margins, respectively. A common theme across all three tech giants is a significant increase in CapEx, projected to reach $90.7 billion for Microsoft (FY26), $95.8 billion for Alphabet (FY26), and $120.8 billion for Amazon (FY25), primarily fueled by substantial AI investments. While Microsoft and Alphabet have seen strong year-to-date stock performance, Amazon has underperformed, with analyst focus keenly set on cloud profitability and the impact of AI investments on future margins and stock trajectory.

Analysis

Microsoft, Alphabet, and Amazon are poised for robust Q3/Q1 earnings, with consensus revenue estimates rising across the board. Microsoft's Q1 2025 revenue is projected at $75.5 billion, driven by its resilient core business, while Alphabet's Q3 2025 revenue is expected to reach $99.8 billion, supported by its advertising segment. Amazon's Q3 revenue estimates have increased to $177.9 billion, primarily due to strength in online retail.

The profitability of key cloud segments remains a central focus, with analyst estimates showing considerable divergence. Microsoft's Intelligent Cloud operating profit for Q1 2026 has a wide consensus range of $10.8 billion to $13.5 billion, suggesting potential for surprise. Alphabet's Cloud business is expected to show improved operating profit margins, reaching 20.4% in Q3 2025, though estimates range from 11.0% to 24.2%. Amazon's AWS margin is projected at 34.2% for Q3, up from last quarter but below earlier expectations, with a wide range of 30.7% to 38.1%.

A significant commonality is the substantial increase in capital expenditures, largely attributed to AI investments. Microsoft's CapEx is projected to double to $90.7 billion by FY2026, Alphabet's nearly tripled to $95.8 billion by FY2026, and Amazon's more than doubled to $120.8 billion by FY2025. While Microsoft and Alphabet have significantly outperformed the S&P 500 year-to-date, Amazon has underperformed, with its stock down 3.3% YTD.

Key Decisions for Investors

• Investors should closely monitor cloud segment profitability and margin guidance for Microsoft, Alphabet, and Amazon, given the wide range in analyst estimates and its potential impact on future stock performance
• Evaluate the implications of significantly increased AI-driven capital expenditures across all three companies on their long-term growth and free cash flow generation
• Consider the relative stock performance, with Microsoft and Alphabet outperforming the S&P 500 while Amazon lags, and assess if upcoming earnings could serve as a positive catalyst for Amazon