Big Tech earnings recap: strong growth, heavier spending but less room for error

Last week confirmed that AI demand remains strong. It also showed how expensive the buildout and capex has become.

Microsoft reported $90.0B in revenue, up 18%, with Azure growth of 43%. Its $678B commercial backlog gives investors strong visibility, but more than $50B of quarterly capex raises the bar for future returns.

Amazon reported $200.6B in revenue, up 20%. AWS grew 37% to $42.2B, which is the fastest growth in 18 quarters. The issue is free cash flow, which turned negative as infrastructure spending increased.

Meta reported $60.8B in revenue up 28%, but costs rose 55%, operating margin fell to 31%, and free cash flow decreased to $784M. Ad revenue is still strong, but shareholders are funding a much more capital intensive company.

Apple reported $109.4B in revenue and $2.02 EPS. The quarter was strong, though management expects slower 9% to 11% revenue growth next quarter as supply constraints and higher memory costs weigh on results.

To me, Microsoft had the strongest quarter.

Amazon showed the best cloud acceleration.

Meta has the most to prove on returns.

Apple remains the most predictable, but its AI spending is still unproven to generate returns.

For value investors, the main question is whether future cash flows will justify today’s capex and valuations.

Which company are you most excited about from here?