What We Learned About AI From This Week’s Big Tech Earnings

Big Tech’s AI boom is still on.

Artificial intelligence was the focus of the five tech giants, cumulatively valued at more than $10 trillion, that reported quarterly earnings this week. Executives at Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG; GOOGL), Amazon (AMZN), and Meta (META) touted the progress their companies have made incorporating AI into their operations and rolling out new AI features for customers. They also spoke to the strength of AI demand—and the challenges they’ve met trying to meet it.

Investors now turn their attention to the last of the Magnificent Seven companies to report: Nvidia (NVDA), whose results are due Nov. 20. Its stock surged to a record high last month as investors anticipated that this week’s earnings would contain evidence of booming demand for its AI chips.

Spending on AI Infrastructure Is Surging…

Big Tech’s spending on infrastructure has skyrocketed this year. Cloud providers have raced to build out their AI operations and meet surging demand for cloud computing. 

Microsoft, Alphabet, Amazon, and Meta spent a cumulative $60 billion on property and equipment in the third quarter, a 60% increase from the same period last year, according to an Investopedia analysis. All four indicated that infrastructure investments would continue to increase next year. 

Surging infrastructure expenses hung over tech giants during their last round of earnings reports in July, when Wall Street was antsy to see evidence that investments were paying off. Those fears seem to have abated somewhat with this week’s reports.

… But Clouds Can’t Grow Fast Enough

A common refrain from tech executives this week was that they can’t keep up with demand. 

Microsoft on Wednesday warned that growth at its cloud unit could slow in its second fiscal quarter. AI demand “continues to be higher than our available capacity,” according to CFO Amy Hood.

Her comments were echoed by Amazon CEO Andy Jassy on Thursday, who said Amazon Web Services was also having difficulty meeting cloud computing demand.

A shortage of the most advanced semiconductors, Jassy said, was the main bottleneck.

AI’s Growth Is Boosting Business

Despite capacity constraints, AI is still driving growth for tech giants.

Microsoft CEO Satya Nadella said the company’s AI business was on track to reach an annual revenue run rate of $10 billion in the current quarter, making it “the fastest business in our history to reach this milestone.” Jassy on Thursday said Amazon’s AI business is growing by triple-digit percentages, three times faster than cloud computing grew in its early stages. 

Alphabet executives said they expected AI investments to “translate to revenue in the fairly short term.” AI Overviews in Google search were being monetized at “approximately the same rate” as older formats, he said, boosting confidence that AI can boost Alphabet’s core ad business as well as its cloud unit.

Meta also touted the benefits it’s seeing from AI. CEO Mark Zuckerberg said AI-driven feed recommendations had increased the time users spent on Facebook and Instagram this year, and that businesses using Meta’s generative AI advertising tools had seen an increase in conversions.

Apple reported record September-quarter iPhone and total revenue on Thursday. CEO Tim Cook noted on a call with analysts that iPhone users were adopting Apple’s newest operating system, the Apple Intelligence-enabled iOS 18.1, at twice the rate of its predecessor, which the firm took as an early indication of strong demand for its custom AI.