Big Tech Earnings Preview: Is AI Monetization Finally Catching Up to Capex?

• Although Big Tech companies are driving the AI trade, their share price performance is deeply lagging behind AI buildout suppliers in 2026. 
• Q1 saw Big Tech achieve early gains in AI monetization, with growth rates hitting multi-year highs across several names. 
• As Big Tech’s Q2 cycle closes in, we detail where key operating metrics and AI growth drivers stand, and the influential numbers to watch. 

The most pronounced difference between 2026’s tech rally compared to rallies in the past is which companies have been left out of it. The names most associated with the AI trade have hardly participated. Google leads Big Tech with returns of 18.7% YTD, followed by Amazon at 10.5% and Meta at 3.4%. Meanwhile, Microsoft has fallen 17.8%. 

What is most shocking is how much Big Tech has lagged in dollar terms. The combined market cap of these four firms rose just $426 billion this year to $11.93 trillion, just 3.7%. Compare this to Micron, a single supplier to the AI buildout, which alone added approximately $700 billion to its market cap in 2026. 

This sets up a central question as earnings season kicks off next week, which is that Big Tech has spent considerable capex for AI infrastructure, and the Street will want to see this spend turning into revenue and profits. Below, we discuss AI-driven revenue and profits for each Big Tech company, and what to watch in Q2 key metrics and headline numbers. 

Google: Clear Indications of the Shift from AI Training to Inference Demand 

Google’s total revenue hit $109.9 billion in Q1, exceeding forecasts by 2.7% with 21.8% YoY growth, marking its fastest overall increase in four years. Excluding one-time gains, GAAP EPS rose 26% YOY to $2.76, beating estimates by 3.4%.  

Google Cloud, a key barometer of its AI-driven performance, was a standout. Revenue hit $20 billion, and growth nearly doubled to 63% YoY versus 32% YoY in Q2 2025, and operating margin nearly doubled versus Q1 2025 to 32.9%. Cloud backlog soared 400% YoY to $462 billion, indicating a huge increase in mid-to-long-term AI demand. 

Looking into Q2, analysts are forecasting revenue of $116.84 billion, or 21.2% YoY growth. GAAP EPS expectations are pinned at $2.89, or 25.5% YoY growth. 

Cloud and Search are Google’s two key AI growth levers and will be the focal point for AI’s continued influence on growth in the upcoming report. Google will look to maintain its strong Cloud momentum. Growth has accelerated in four consecutive quarters, and AI solutions, which are separate from AI infrastructure, became Cloud’s largest growth contributor for the first time last quarter. Revenue from products built on GenAI models rose 800% YoY, and first-party models processed more than 16 billion tokens per minute, up 60% QoQ. These are clear indications of the shift from AI training to inference demand. 

At $60.4 billion, Google’s Search and Other segment accounted for 55% of sales, and more than 3X Cloud’s $20 billion. Search had another strong showing in Q1, with revenue rising 19% YoY for its fourth consecutive quarter of accelerating growth. Google says that over 30% of customer search spend now uses AI-enabled campaigns, implying that tens of billions in advertising spend are flowing through those campaigns. 

Can Google Maintain Its Strong Cloud and Search Momentum?

With Cloud and Search, Google is building large AI revenue streams. Seeing a further acceleration in Cloud growth and token consumption growth will be critical to Google justifying its spending and showing that its improving AI monetization is here to stay. This extends to Search growth, with increases in AI campaign adoption being an important metric to watch. 

Microsoft: AI Revenue Surges as Azure Growth Plateaus 

Microsoft posted total sales of $82.9 billion last quarter, up 17% and beat estimates by 1.8%. GAAP EPS rose 23% to $4.27 and surpassed estimates by 5.4%. Operating margin expanded by approximately 60 basis points YOY to 46.3%, although it dropped 80 basis points QoQ. Next quarter’s revenue forecast sits at $87.7 billion, implying growth of 14.6%, while GAAP EPS forecasts of $4.22 imply growth of 15.6%. 

Part of the reason for Microsoft’s particularly pronounced underperformance has been the lack of acceleration in Azure, where AI cloud sales surface. Azure’s growth has hovered between 40%-39% over the past four quarters. In contrast, Google Cloud and AWS are seeing clear growth accelerations. This comes even as Microsoft’s AI business grew 123% YoY to over $37 billion in ARR, up nearly 3X since Microsoft last reported the figure at “over $13 billion” in early 2025. 

Microsoft’s RPO increased 99% YoY to $627 billion, but this figure overstates the company’s momentum during the quarter. Notably, RPO rose less than 1% QoQ, as OpenAI agreed to purchase incremental Azure services of $250 billion in October 2025. At that time, Microsoft said that OpenAI represented 45% of its RPO. Amid this, RPO excluding OpenAI rose 26% YOY, a slight deceleration from 28% YoY in the prior quarter, although Microsoft noted this was in line with historic seasonality. 

Sign up for our newsletter to receive Part 2: Big Tech Earnings Preview: Could Free Cash Flow Turn Negative in 2026?  We will examine cash balances, debt, and capex versus cash flow – including one Big Tech company already in negative free cash flow territory.

Can Microsoft’s Maia 200 Help Reaccelerate Azure Growth?

For Microsoft, accelerating Azure growth would be key to significantly beating expectations. Notably, the firm continues to guide to 39-40% growth next quarter, showing no acceleration over the last several quarters. With Microsoft expecting to be capacity constrained beyond 2026, the Maia 200 chip is one factor that could help boost Azure growth. When it was unveiled in January, Microsoft said Maia 200 delivers 30% better performance per dollar than the latest generation hardware in its data centers. 

Thus, scaling Maia 200 deployments could allow Microsoft to increase token generation within a fixed power footprint, driving Azure growth higher despite capacity constraints. However, this benefit may be longer-term and may not appear significantly in the Q2 report. 

Meta: Ads Report Fastest Growth Since 2021 

Meta had an impressive Q1 from a growth perspective. Revenue increased 33.1% YoY to $56.3 billion, marking its fastest growth rate in over four years, while exceeding estimates by 1.4%. Excluding an abnormal tax benefit, GAAP EPS rose by a modest 13.7% to $7.31 and exceeded estimates by 7.2%, despite operating margin declining 90 basis points YoY and 60 basis points QoQ to 40.6%. In Q2, analysts forecast revenue of $60.2 billion, or 26.7% growth. GAAP EPS forecasts sit at $7.20, or 0.9% growth, pressured by operating margins. 

Notably, Average Revenue per Person (ARPP) increased 26.7% in Q1 to $15.66, driven by Meta’s dual ad levers of increasing the number of ads shown to users and charging higher prices per ad. Ad impressions delivered grew by 19%, and average price per ad rose 12% – both coming in at their highest rate since at least Q1 2025. 

Meta may still be driving the second largest AI revenues of any company, only behind Nvidia, as pointed out in our previous analysis “The AI Leader Nobody is Talking About.” In October of 2025, Meta said that ARR of its end-to-end AI-powered ad campaign tools, known as Advantage+, hit $60 billion. That compares to its $20 billion ARR as of March 2025, or a 3X increase in seven months. 

Meta has not disclosed this figure since. However, hitting analyst expectations for total revenue of $60.2 billion in Q2 mean a 17.5% sales increase over Q3 2025. If Advantage+ grew at the same pace, its run rate would hit $70.5 billion. This is likely a very conservative estimate, given its past growth. Growing by 1.5X in nine months from October to July would put the figure at $90 billion. Considering this, it is still very possible that Meta is driving the highest AI revenue outside of Nvidia. 

Can Meta Deliver a Beat-and-Raise Quarter?

Estimates point to growth continuing to decelerate after Q2. However, Meta could potentially unlock improvements in its ad ranking and recommendation models that allow for a beat and raise, and to keep growth momentum elevated. Strong demand for Meta’s recently released subscription offerings for app users and businesses could also contribute to growth expectations. Additionally, it will be important to watch if Meta provides any concrete details around its reported cloud computing push. 

Amazon: AWS Growth Hits a 15-Quarter High

Last but not least, Amazon also posted strong growth last quarter. Revenue came in at $181.6 billion, increasing 16.7%, and 2.4% better than analysts anticipated. The company’s net income was $30.3 billion, but this included $16.8 billion in pre-tax gains from its investments in Anthropic.  

Backing out the gain would lead to GAAP EPS near $1.60, in line with to slightly below estimates. Operating margin expanded significantly by 130 basis points YOY and 140 basis points QoQ to 13.4%. Looking ahead, analysts project revenue of $195.9 billion in Q2, or a 16.8% increase. Meanwhile, GAAP EPS is forecast to rise 8.1% to $1.82. 

AWS, the company’s main AI growth driver, continued gaining momentum. Growth accelerated to 28% YOY, achieving its fastest rate in 15 quarters. This was also the fifth quarter of consecutive growth acceleration and was over 1.6X higher than the 17% growth seen in Q1 2025. Total backlog sits at $364 billion, not including an over $100 billion deal with Anthropic. 

Within this, AWS for AI has achieved $15 billion in ARR, and the company’s chip business saw sales grow by triple digits YOY and 40% QoQ, achieving an ARR of over $20 billion. 

Can Trainium3 Drive Another AWS Growth Acceleration?

Amazon has over $225 billion in revenue commitments for Trainium, its AI accelerator. Similar to Microsoft, Amazon’s Trainium3 chip could aid an acceleration in AWS growth. The chip began shipping at the start of 2026 and Amazon claims it has 30%-40% better price performance than Trainium2. As the chip rolls out, AWS could serve more tokens within existing data centers to drive revenue growth. 

Conclusion

Heading into Q2, all four Big Tech companies are showing early signs of AI monetization gains. Google Cloud reported a critical acceleration by nearly doubling to 63% YoY, while AI services became the largest growth driver within Cloud for the first time. Microsoft saw a nearly 3X increase in its AI business in just over a year, and Meta’s overall revenue rose at its fastest rate in over four years while underlying ad metrics accelerated. Additionally, AWS for AI and Amazon’s chips business posted ARR of $15 billion and over $20 billion, as segment growth reached a 15-quarter high.  

Instead of positioning in Big Tech, the I/O Fund has concentrated our portfolio across networking, energy and memory stocks. Despite sector-wide volatility in July, we currently have five positions up over 100% YTD and ten positions up over 50% – with many held at high allocations.

This is not one year of outperformance. Since our inception in May 2020, the I/O Fund has delivered a cumulative return of 326% — outperforming the Nasdaq-100 by 152 percentage points., and that comparison does not yet include our 2026 outperformance. 

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Please note: The I/O Fund conducts research and draws conclusions for the company’s portfolio. We then share that information with our readers and offer real-time trade notifications. This is not a guarantee of a stock’s performance and it is not financial advice. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis. 

Leo Miller, AI and Semiconductor Investment Writer at I/O Fund, contributed to this analysis. Leo Miller owns shares in META and GOOGL.

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