It’s no coincidence that the most successful tech companies this past quarter have been the ones with a sound AI strategy. The winners here have all established themselves as AI cloud-computing forces, as you’ll see below.
Alphabet
Alphabet, Google’s parent company, reported its 2026 second-quarter earnings on July 22.
Some of the highlights include:
- $119.8 billion in revenue, a 24.2% year-over-year increase
- $40.8 billion in operating income, up 30% year over year
- A staggering $9.11 in earnings per share (“EPS”), which shattered expectations of roughly $3.00 and represented a year-over-year increase of 294%
And it was the cloud business that drove many of these gains. Google Cloud revenue soared to $24.8 billion for the quarter, an 82% year-over-year increase. Google’s cloud division also reported $8.8 billion in operating income, a 35.6% operating margin (up from 20.7% the year prior), and an impressive cloud backlog of $514 billion.
Google Services, which includes Gmail, YouTube, and Google Search, still drives most of the business. In the second quarter of 2026, the category earned $94.5 billion in revenue, up 15% year over year. Operating income jumped 20% to $39.5 billion, and YouTube ad revenue increased by 13%.
I must point out, however, that Alphabet stock took a roughly 7% dip after its earnings call despite massive revenue growth. All the AI-related spending pushed the company’s free cash flow (“FCF”) below zero for the first time since Alphabet’s public-trading debut.But Alphabet quickly bounced back, gaining more than 17.5% between July 23 and August 3.
So, while Alphabet has successfully monetized AI, its AI spending is still worth monitoring moving forward.
Microsoft
Microsoft reported its fiscal fourth-quarter 2026 earnings on July 29, exceeding Wall Street expectations behind strong performance by – you guessed it – its Azure cloud services and AI growth.
Among Microsoft’s fourth-quarter highlights were:
- $90 billion in revenue, up 18% year over year, and full-year revenue of $331.8 billion, also up 18%
- $40.6 billion in operating income, an 18% year-over-year increase, and full-year operating income of $155.2 billion, with year-over-year growth of 21%
- GAAP (generally accepted accounting principles) net income of $35.8 billion (up 31%) and non-GAAP net income of $35.3 billion (up 22%)
- GAAP diluted EPS of $4.81 (up 32%) and non-GAAP diluted EPS of $4.74 (up 23%)
And just as Google Cloud drove Alphabet’s second-quarter success, Microsoft Cloud was a huge difference-maker for the company in its fourth quarter.
Microsoft Cloud generated $59.3 billion in revenue, growing 27% year over year. Drilling down a bit more, revenue for the company’s Intelligent Cloud – which includes server products and cloud services mainly anchored by Microsoft Azure, enterprise server software, and cloud-based AI and data platforms – reached $39.3 billion, a 32% year-over-year increase.
Intelligent Cloud revenue actually surpassed that of Microsoft’s Productivity and Business Processes segment. This unit, which includes Microsoft 365, LinkedIn, and Dynamics 365, delivered $37.8 billion in revenue.
And Microsoft’s cloud services continue to grow yearly. Microsoft 365 Commercial cloud revenue increased by 16%, and Microsoft 365 Consumer cloud revenue grew by 24%. Azure and other cloud-services revenue surged 43%.
Not to mention that Azure revenue passed $100 billion for the first time during fiscal 2026. Plus, Microsoft 365 Copilot passed the 30 million paid seats milestone, and the company added 88 new data centers during the year to support demand for its rapidly growing AI services.
Amazon
Amazon enjoyed another stellar quarter, reporting $200.6 billion in net sales – up 20% year over year – during the second quarter. Of course, much of Amazon’s revenue is driven by its ginormous e-commerce and retail machine.
But Amazon Web Services (“AWS”) is steadily closing the gap as the company’s cloud platform continues to make money hand over fist.
In the second quarter:
- AWS sales grew 37% year over year to $42.2 billion and reached a $169 billion annualized run rate.
- AWS operating income jumped from $10.2 billion to $16.6 billion year over year.
- Amazon’s AI and custom chips – which include Trainium, Inferentia, Graviton, and the Nitro System – doubled last year’s annualized revenue run rate.
During the earnings call, Amazon President and CEO Andy Jassy said, “AWS is booming, growing 36.7% year-over-year in Q2 – our fastest growth in 18 quarters – and our AI and Chips businesses each eclipsed run rates of more than $25 billion.”
And this is just the tip of the iceberg. Amazon’s second-quarter earnings press release reads like a laundry list of AI achievements and milestones.
That, plus the results delivered by Alphabet and Microsoft, is exactly what investors and analysts want to see from companies focused on AI. It’s no longer good enough for a tech company to say, “We’ve got really cool ideas and AI innovations coming up, and they’re going to change the world.”
Wall Street is past the point of promises and grand visions. It wants tangible AI strategy, technology, and – most importantly – results. The companies above have been delivering that already. The next three… well, we’re all still waiting.
This Past Quarter’s Big AI Losers: Meta, Apple, and Tesla
Alphabet, Microsoft, and Amazon have developed clear AI strategies and executed them. But Meta, Apple, and Tesla are fumbling around in the dark, still not entirely sure what to do with AI and how to make something tangible and useful out of it – and, more importantly, something that will move both the top and bottom lines.
Meta
In early July, I wrote a piece on Meta about how it’s finally getting into the AI cloud business, and stated:
It’s no secret that Meta’s forays into AI have not gone well.
When I analyzed Meta’s massive layoffs in late May, I wrote:
[CEO Mark] Zuckerberg’s laser focus on Meta’s AI ambitions is understandable, considering the company has fallen behind many of its competitors.
Earlier this year, after pouring billions into the project, Meta delayed the release of its new foundational AI model (code name: Avocado, official name: Muse Spark) until April due to performance issues…
That delay was just the latest AI setback for Meta. In February, the company stopped the release of its chatbot because internal testing found that it egregiously (between roughly 55% and 67% of the time) failed to block dangerous content involving minors…
On a less disturbing note, back in September 2025, Meta’s AI repeatedly – and rather embarrassingly – failed during a live demonstration of the company’s new smart glasses at its Meta Connect event.
All of this, to me, leads to a simple question: What exactly is Meta’s AI goal?
Now we know. Meta, in fact, had no specific AI goal. The company took more of a “throw everything at the wall and see what sticks” approach. Unfortunately for Meta, hardly anything stuck to the wall.
So, Zuckerberg wisely pivoted, with Meta announcing that it plans to sell access to its expansive – and excess – AI compute power and models.
Interestingly, with Meta finally recognizing the value of the AI cloud space, it holds an advantage over its hyperscale competitors, as mentioned in my July 8 article:
What we do know is that Meta is planning to sell access to its AI-infrastructure models. Like Amazon’s serverless Bedrock platform, Meta would operate the hardware and data centers that power the AI models while charging developers for access. But that’s only one piece of Meta’s reported cloud puzzle.