Four budgets, one reaffirmation

Between 22 and 31 July the four largest buyers of artificial-intelligence computing hardware each told investors what they intend to spend. Three raised the number. The fourth did not, and it was the one the market paid for.

Microsoft — the software company behind Office, Windows and the Azure cloud platform, run by Satya Nadella — reported fiscal fourth-quarter revenue of $90.0 billion, up 18%, with Azure growth accelerating to 43% from 40% and crossing $100 billion of annual revenue. But the line that moved the stock was finance chief Amy Hood's statement that calendar-2026 capital spending remains approximately $175 billion — unchanged, not raised, a reaffirmation that extended the after-hours gain from 3% to as much as 8%.

Amazon, whose Amazon Web Services division rents computing capacity alongside its retail marketplace, went the other way, lifting 2026 cash capital expenditure to about $220 billion from $200 billion on inflated memory prices while warning capacity will still trail demand. Alphabet, parent of Google Search, YouTube and Google Cloud, raised its range to $195-205 billion from $180-190 billion and saw its shares fall nearly 5% for it. Meta Platforms, owner of Facebook, Instagram and WhatsApp, raised capital spending to $130-145 billion and declined to give any 2027 figure at all.

The businesses: two accelerating, one mispriced, one shrinking

Amazon and Microsoft CONFIRM their re-ratings on operations. AWS revenue reached $42.2 billion, up 36.7% — a fifth consecutive quarter of acceleration, at a $169 billion annualised run rate — with operating margin up 520 basis points to 39% and a $496 billion backlog. Management said most 2027 capacity is already reserved. Its Trainium and Graviton in-house chip business runs above $25 billion annualised. Microsoft's fiscal 2026 revenue was $331.8 billion, up 17.8%, operating margin 46.8%; but gross margin has now compressed three straight years, 69.8% to 68.8% to 67.9%, as AI capacity costs land in cost of revenue. Its record $678 billion of commercial contracted backlog carries a caveat: almost a third traces to a single customer, OpenAI, and excluding it the figure grew 25% rather than 84%.

Alphabet is the divergence, and it runs the wrong way. Google Cloud revenue rose 82% to $24.8 billion, operating margin widened from 20.7% to 35.6%, backlog rose $50 billion sequentially to $514 billion, and group operating income grew 30.4% on 24.2% revenue growth. The shares are down over three months. Meta CONFIRMS its own decline: revenue grew 28% to $60.8 billion while operating income fell 8.2% and margin dropped from 43.0% to 30.9%, on $2.4 billion of legal charges and $1.2 billion of severance. Earnings of $6.18 a share missed the $7.14 consensus and free cash flow collapsed from $8.5 billion to $784 million.

Valuation: the verdicts differ by name

Because huge non-operating gains distort trailing earnings at Alphabet and Amazon, price-to-gross-profit is the cleaner comparison. Microsoft has gone from 13.4 times trailing gross profit on 29 July to 16.7 today — the top of its 2026 range, re-rated in eight sessions, at 25.8 times forward earnings. That CONTRADICTS the case for further runway from here. Amazon at 7.57 times is cheaper than May's 7.75 despite the rally, on the lowest enterprise-value-to-EBITDA of the four at 12.3 — CONFIRMS. Alphabet at 15.8 times gross profit versus 17.6 in May, roughly 23.6 times clean 2027 consensus earnings of $15.01, while cloud compounds at 82% — the clearest CONTRADICTION between business and tape in the group. Meta at 8.10 times gross profit, down from 10.34 in May, is a de-rating its own falling profits justify: INCONCLUSIVE, because earnings are still going down.

Who funds 2027

The financing has changed character. Across the five largest hyperscalers, incremental annual debt has risen from 9% of capital spending in fiscal 2024 to 32% on a trailing-twelve-month basis, with Alphabet pricing an $84.75 billion equity raise in June and aggregate 2026 capex above $690 billion. Alphabet's second-quarter free cash flow was negative $5.9 billion; Amazon's trailing free-cash-flow yield is negative 0.39%. Depreciation assumptions are doing work too: the group extended server lives from three-to-four years toward six during the early 2020s, and Amazon has since cut back, trimming certain servers to five years and reducing 2025 operating income by about $0.7 billion.

The tape agrees only in parts. Microsoft gapped 15.5% on 30 July and Amazon 15.3% on 31 July, while Meta fell 8.0%; the two winners supply essentially the entire group's one-month gain. Microsoft's 50-day average sat below its 200-day every session of 2026 until 6 August, its first bullish crossover of the year. Over twelve months, Alphabet is up 82% and Meta down 22%.

The setup

Where it stands — Three of four raised 2026 capital spending; only Microsoft's reaffirmation was rewarded, and only Alphabet's accelerating cloud is unpriced.

Would confirm — Alphabet delivering the "significant" 2027 capex increase alongside cloud growth holding above 50% next quarter.

Would invalidate — Azure decelerating below 40%, or AWS backlog conversion slipping while Amazon's free cash flow stays negative.

Watch next — Third-quarter results in late October, when Meta must finally supply a 2027 capital-spending figure.

Valuation — Microsoft 16.7x trailing gross profit versus 13.4x on 29 July; Alphabet 15.8x versus 17.6x in May.