U.S. Tech Giants Face Scrutiny Over AI Capital Spending as Microsoft Stands Out

Huoxing Finance reports: On July 30, the earnings season for the U.S. tech giants enters a critical window. As of after-hours trading on July 29 (Eastern Time), Alphabet, Tesla, Microsoft, and Meta have released their results; Apple and Amazon will report after-hours on July 30, while NVIDIA’s latest quarterly earnings are scheduled for August 26. The already-released earnings show that AI-related capital expenditures continue to rise broadly, prompting markets to scrutinize return on investment, free cash flow, and growth sustainability more rigorously. Alphabet led the market’s heightened awareness of AI spending. The company posted Q2 revenue of $119.8 billion, up 24% year-over-year; Google Cloud revenue reached $24.8 billion, surging 82% YoY; overall operating margin rose to 34%. However, quarterly capital expenditures spiked to $44.9 billion, free cash flow turned negative at -$5.9 billion, and the company raised its 2026 capital expenditure guidance from $180–190 billion to $195–205 billion. Despite strong cloud performance, investor concerns over cash flow deterioration weighed on the stock post-earnings. Tesla faced greater pressure on profitability and cash flow. Q2 revenue was $28.24 billion, up 26% YoY; deliveries reached 480,100 vehicles, up 25%; energy storage deployments totaled 13.5 GWh, up 41%. However, adjusted EPS came in at $0.33, below expectations; operating profit fell 57% YoY to $398 million; free cash flow was -$1.092 billion. The company expects 2026 capital expenditures to exceed $25 billion, directed toward Robotaxi, Optimus, Dojo computing power, and manufacturing capacity—marking declining market patience for high spending in exchange for future gains. Microsoft offered a rare positive example. Fourth-quarter revenue reached $90 billion, up 18%; EPS of $4.81 exceeded forecasts; net income rose 31% YoY to $35.8 billion. Microsoft Cloud revenue hit $59.3 billion, up 27%, with Azure growing 43% and over 30 million paid users adopting Microsoft 365 Copilot. Quarterly capital expenditures totaled approximately $41 billion, with no slowdown in AI and cloud infrastructure investment—but Azure and Copilot have demonstrated clearer monetization pathways, leading to a relatively positive market response. Meta’s earnings reignited debate over AI spending. Q2 revenue was $60.8 billion, up 28%; advertising revenue reached approximately $59.36 billion, up 27%. However, EPS of $6.18 fell short of expectations; net income declined 14% YoY to $15.85 billion. Costs and expenses surged 55% YoY to $42.03 billion; capital expenditures hit $31.08 billion, and free cash flow dropped from $8.55 billion a year ago to $784 million. The company revised its full-year capital expenditure guidance to $130–145 billion and signaled slowing revenue growth in Q3, pressuring post-market performance. Next up, Apple and Amazon will cap off this week’s major earnings events. Apple’s focus lies in iPhone sales, services revenue, AI timeline, and cost pressures; Amazon will be scrutinized for AWS growth rates, AI-driven cloud demand, and whether capital expenditures will be further raised. Although NVIDIA’s earnings are not due until late August, it has already become a direct barometer of this cycle of tech giant capital spending. Overall, the central theme of the U.S. tech giants’ earnings has shifted from the scale of AI investment to the return on that investment. Microsoft has temporarily demonstrated that cloud and AI can generate tangible revenue; Alphabet, Meta, and Tesla are now under pressure to provide stronger evidence of cash flow resilience. The upcoming earnings reports from Apple, Amazon, and NVIDIA will determine whether this wave of anxiety over AI capital spending continues to spread—or whether markets can return to a growth narrative.