Morgan Chittum of Fortune says that, like death and taxes, one thing is inevitable: Wall Street will seize every opportunity to look for cracks or strong signals in AI investment returns. This has been true since ChatGPT went viral in 2022 and AI became one of the most important investment themes in recent years. Today, the market’s latest barometer is the earnings reports of major tech companies.
This week, Amazon, Alphabet, and Microsoft delivered new data points. The results were mixed, but two things were clear: demand for AI remains strong, and related spending is enormous.
Alphabet has become a particular focus of public markets: despite the Google parent company’s strong growth in cloud revenue, that growth alone has not been enough. Google Cloud’s third-quarter revenue more than doubled year-over-year, while capital expenditures reached $51.4 billion. However, profits and revenue still fell short of expectations, causing the company’s stock to plunge nearly 13% on Thursday, erasing $500 billion in market value.
Amanda Gerut of Fortune wrote:
Wagner wrote that investors are concerned that Google’s search business growth is slowing, fearing it could be consumed by AI disrupting this business model. Google’s search revenue grew 12% to $63.4 billion, a clear slowdown compared to the 17% growth in the second quarter and 19% growth in the first quarter. Analysts had expected search revenue to grow by 15%.
However, Alphabet CEO Sundar Pichai called it a "strong quarter," noting that the company's annualized revenue run rate has reached $500 billion. Nevertheless, this was the company's worst trading day in history.
Meanwhile, later on Thursday, Amazon's stock fell about 7% after its earnings and revenue missed analyst expectations. Aggressive AI spending caused the e-commerce giant to report negative free cash flow for the second consecutive quarter.
Sebastian Herrera of Fortune reports:
Performance data shows that demand for Amazon Web Services, particularly related to AI, remains strong. However, the Seattle-based company is also continuing to invest at a record pace to keep up—not because its non-cloud business is weakening. On Thursday, Amazon reaffirmed its expectation that capital expenditures for 2026 will be approximately $220 billion.
The company's advertising revenue grew 12% year-over-year in the third quarter, below analyst expectations; its guidance for holiday-quarter operating profit also fell short of Wall Street estimates. Massive AI infrastructure spending also caused free cash flow to turn sharply negative; the company stated that free cash flow has shifted from a positive $14.8 billion to a negative $42.4 billion over the past year.
A day ago, Microsoft painted an even brighter picture. The software giant exceeded expectations in both revenue and profit. Azure revenue grew by 48%, providing encouragement to investors despite significant AI-related costs. Following Wednesday’s market close, Microsoft’s stock rose approximately 4%.
Herrera also reported:
Microsoft investors have long hoped to see Azure continue its high growth and demonstrate that the company’s bets on AI, such as the Copilot assistant, can generate substantial revenue. Both metrics are crucial, as they indicate whether Microsoft and the broader AI industry can sustain demand, especially as tech giants invest heavily in data center construction.
On Wednesday, Microsoft CFO Amy Hood said on an earnings call with analysts that capital expenditures for calendar year 2026 are expected to reach approximately $170 billion, and that the company anticipates capital expenditures for the current quarter to exceed $50 billion. Microsoft reported first-quarter capital expenditures of $45.2 billion, up from the prior quarter but below analyst expectations. Hood noted that this figure reflects some delays in the expected delivery of third-party capacity.
Hood said, "Our demand still exceeds supply."
The next test appears to arrive on Monday, when Apple reports earnings. Wall Street is still seeking the same answer: Can the AI boom deliver more than just massive bills?
VENTURE DEALS
- Firehawk Defense, a manufacturer of rocket engines, propellants, and propulsion systems headquartered in Dallas, Texas, has completed a $150 million Series D round led by Advent and Rochefort Asset Management.
- Bites, headquartered in New York and Tel Aviv and providing AI-powered video training for frontline employees, has raised $40 million in Series A funding led by PeakSpan Capital, with participation from existing investors including Vertex Ventures, Horizon Capital, Rittenhouse Ventures, and Lyra Ventures.
- Opentrons, headquartered in New York and developing laboratory automation robots and AI software, has completed a $40 million Series E round led by Avego, with participation from BroadOak Capital Partners.
- Phonic, headquartered in San Francisco and developing voice-to-voice AI models for voice agents, has completed a $27.5 million Series A round led by First Round, with participation from Lux Capital, Felicis, Definition, and Essence VC.
- Neuron Industries, headquartered in Gardena, California, and developing AI-driven industrial controllers and automation software, has completed a $10 million seed round led by FCVC and Obvious Ventures, with participation from Y Combinator, Thin Line Capital, Zee Prime Capital, and Founder Factor.
- Mintive, headquartered in San Francisco and offering AI agent identity, access management, and security software, has raised $7 million in funding led by Cowboy Ventures.
- ShareWillow, a New York-based company providing performance-based compensation software for family services businesses, has raised $8.5 million in seed funding from investors including Lerer Hippeau and Circadian Ventures.
- FinMaq, a fintech company based in Colombia that provides financing for machinery and equipment to small and medium-sized enterprises, has completed a $6.5 million Series A round led by Accion, with participation from Mundi Ventures and existing investors ALIVE Ventures and 30N Ventures.
- Crux Labs, headquartered in New York and offering AI agent evaluation and improvement software, has raised over $6 million in funding, led by Benchstrength and Misneach, with participation from Analog Ventures and Pareto Holdings.
- Bleu Robotics, a Paris-based company developing AI software for industrial humanoid robots, has raised €5 million ($5.6 million) in a pre-seed round led by Contrarian Ventures and OVNI Capital, with participation from Kvanted and others.
- Wrapped Health, headquartered in Washington, D.C., and developing software that connects clinical recommendations with consumer health product purchases, has completed a $2.1 million pre-seed round led by Lightbank and Arteria Capital.
PRIVATE EQUITY
- Thrive Holdings has agreed to acquire ADT in a fully cash-funded privatization transaction valued at $15.3 billion, including debt. ADT, headquartered in Boca Raton, Florida, is a provider of home and small business security systems.
- InTandem Capital Partners acquired a majority stake in Atlas Health, an AI-driven patient affordability software company. Financial terms were not disclosed.
- Rainier Partners acquired Apex Insurance Services. Apex, headquartered in Richardson, Texas, is a managing general agent platform specializing in non-standard auto insurance. Financial terms were not disclosed.
- Third Space Partners acquired Quest Events. Quest, headquartered in Frisco, Texas, provides rental solutions for curtains, modular sets, stages, and event furniture for live events. Financial terms were not disclosed.