Major Capital Spending Ramps Confirmed by Big Tech Holdings

Wednesday night was a big one for Big Tech with quarterly results from Alphabet (GOOGL) , Meta Platforms (META) and Microsoft (MSFT) .

We’ll get to each company’s report and outlook, and our updated thoughts in a successive alert, but quickly we’ll share Alphabet’s was very confirming for our view earlier this year that it was a mistake to count Google out of the AI race. And yes, we plan on addressing our GOOGL price target. Stay tuned.

We see the post-earnings performance in META as an overreaction, even though the company is ramping up spending plans for the coming quarters, which will hinder margin expansion near term. We will likely revisit our META price target and may be inclined to pick up some additional shares once they settle out in the coming days. More on that to come.

With Microsoft, despite capacity constraints, the company continued to win cloud business and deliver some nice margin expansion in the process, cementing our reasons to only do a modest round of profit taking on Wednesday.

Getting to the central theme across all three companies, it is clear that AI and data center capital spending levels are moving even higher. As Microsoft indicated and we suspected with others, capacity constraints restrained revenue growth, and that is being addressed with another leg up in capital spending levels.

Alphabet

Google Cloud revenue hits $15.2 billion in the September quarter, up 33.5% compared to the year-ago quarter and double-digits sequentially. As you can imagine, Google called out AI as a key reason for that growth and shared its cloud backlog grew an even quicker 46% quarter-over-quarter to $155 billion.

With that in mind, the company now sees 2025 capex in the range of $91 billion to $93 billion, up from the prior estimate of $85 billion, with a “significant increase” planned for 2026.

Meta Platforms

Capex for this year is now expected to be $70 billion to $72 billion, up from the prior forecast of $66 billion to $72 billion. Meta shared that it intends to invest aggressively to meet stronger-than-expected compute needs, and that means its capex dollar growth “will be notably larger in 2026 than 2025.”

Microsoft

The company confirmed it remains capacity-constrained, noting that even though Azure AI services revenue was in line with expectations, demand again exceeded supply even as Microsoft brought more capacity online. Exiting the quarter, its commercial remaining performance obligations (RPOs) hit $400 billion, up 50% year over year, and we should keep in mind that this does not include the recent $250 billion incremental win with OpenAI.

In response, Microsoft shared that it is increasing spending, with the growth rate in that spending for the current fiscal year being higher than it was in the prior one. Those efforts are expected to increase the company’s total AI capacity by 80% this year and help double its total data center footprint over the next two years. For context, Microsoft’s capital spending in the September quarter was about $35 billion

Connecting the Dots

As we suspected, all three companies are lifting their capital spending, and odds are we’ll hear that from Amazon (AMZN) after Thursday's market close as well. Here’s the thing: As helpful as those comments were, they were directional in nature and lacked hard numbers. We’re not surprised by that, as companies tend to only discuss capital spending dollars for the coming fiscal year once they have entered it. Some may be disappointed that we didn’t get those concrete figures, but directionally, we like what we see for our holdings.

We should get more concrete 2026 capital spending details from Meta, Alphabet and Amazon in January. At that time, we’ll be able to gauge if the aggregate 2026 capital spending for those four Big Tech hits the $420 billion the market expects compared to $360 billion this year. That said, directionally, spending levels point to a continued ramp in AI and data center chip demand for Nvidia (NVDA) and Marvell (MRVL) and suggest Qualcomm (QCOM) should see some traction as it leverages the existing customer base inside the acquired AlphaWave semi business.

Once we have Amazon’s results and capex comments in hand, we’ll revisit our NVDA price target and make any needed adjustments for the one we have for MRVL shares.

We will continue to monitor AI adoption and usage trends, but based on what we’ve seen thus far, using the baseball analogy, we continue to think we are only in the third or fourth inning at most.

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At the time of publication, TheStreet Pro Portfolio was long GOOGL, META, MSFT, AMZN, NVDA, MRVL and QCOM.