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Alphabet Takes the Spotlight Among Mag 7 Hyperscalers
Alphabet took the spotlight among the other Mag 7 hyperscalers that reported quarterly results this week, alongside Amazon and Microsoft.
Delivering a stellar Q1 report on Wednesday, Alphabet’s net sales were up 24% YoY to $94.66 billion and comfortably topped estimates of $92.22 billion. More impressive, Alphabet’s Q1 EPS surged 82% to $5.11 and crushed expectations of $2.64 per share by 93%.
The statement was clear: Alphabet is firing on all cylinders as Google Search and YouTube growth remained healthy with double-digit rates, and cloud acceleration was on full display.
Google Cloud Delivers Market-Leading Growth
At a pivotal moment, when the AI boom is being defined by the hyperscale race, Alphabet’s cloud growth was dramatically stronger than Microsoft's and Amazon’s.
Last quarter, Microsoft’s cloud revenue spiked 29% YoY to $54.5 billion, with Amazon Web Services (AWS) revenue seeing a 28% spike to $37.6 billion.
Still, Alphabet’s acceleration was on another level as Google Cloud reported its fastest growth rate ever, with Q1 revenue soaring 63% YoY to a quarterly peak of $20 billion.
The primary growth drivers were Alphabet’s enterprise AI infrastructure offerings, which are growing in popularity thanks to its Gemini-based solutions, with a cloud backlog that nearly doubled to over $460 billion. Alphabet highlighted that Gemini Enterprise is seeing tremendous momentum, with 40% growth quarter over quarter in paid monthly active users.
Notably, Google’s AI products and tools are built on its Gemini family of AI models, including enterprise agents, workplace automation tools, developer assistants, and AI-powered cloud services.
The cherry on top was that Alphabet stated this was its strongest quarter ever for consumer AI plans, driven by its Gemini app. This pushed Alphabet’s paid subscribers to a record 350 million, including YouTube and Google One (cloud storage subscription).
Alphabet’s Strategic Spend Is Delivering the Goods
Igniting a sharp post-earnings rally in Alphabet stock was that it appears to be capitalizing on the massive spending being seen among the Mag 7 hyperscalers and is starting to provide the clearest justification to keep doing so.
Although Alphabet significantly increased its 2026 capital expenditures (CapEx) guidance due to surging AI cloud demand, it still came in beneath Amazon’s updated commitment of $200 billion and is in line with Microsoft’s plan to spend $190 billion.
Alphabet's CapEx outlook is now $180-$190 billion, with management stating 2027 CapEx will significantly increase beyond these levels. It’s noteworthy that the spending is focused on AI technical infrastructure, including data centers, tensor processing units (TPUs), and cloud capacity.
Justifying the increase in CapEx is that Alphabet repeatedly emphasized that AI infrastructure demand is outpacing available compute, stating its record cloud revenue would have been higher if capacity were available.
Bottom Line
Alphabet’s cloud segment is becoming a serious growth engine as it continues to battle Amazon and Microsoft for market share. With the hyperscale race heating up, AI investments are fueling the broader expansion of these tech giants, and Alphabet appears to be separating itself from the pack.
To that point, Alphabet’s AI products are clearly driving both usage and revenue, and most importantly, its profitability has expanded significantly.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Alphabet, Amazon and Microsoft
For Immediate Release
Chicago, IL – May 4, 2026 – Today, Zacks Investment Ideas feature highlights Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) .
Alphabet Takes the Spotlight Among Mag 7 Hyperscalers
Alphabet took the spotlight among the other Mag 7 hyperscalers that reported quarterly results this week, alongside Amazon and Microsoft.
Delivering a stellar Q1 report on Wednesday, Alphabet’s net sales were up 24% YoY to $94.66 billion and comfortably topped estimates of $92.22 billion. More impressive, Alphabet’s Q1 EPS surged 82% to $5.11 and crushed expectations of $2.64 per share by 93%.
The statement was clear: Alphabet is firing on all cylinders as Google Search and YouTube growth remained healthy with double-digit rates, and cloud acceleration was on full display.
Google Cloud Delivers Market-Leading Growth
At a pivotal moment, when the AI boom is being defined by the hyperscale race, Alphabet’s cloud growth was dramatically stronger than Microsoft's and Amazon’s.
Last quarter, Microsoft’s cloud revenue spiked 29% YoY to $54.5 billion, with Amazon Web Services (AWS) revenue seeing a 28% spike to $37.6 billion.
Still, Alphabet’s acceleration was on another level as Google Cloud reported its fastest growth rate ever, with Q1 revenue soaring 63% YoY to a quarterly peak of $20 billion.
The primary growth drivers were Alphabet’s enterprise AI infrastructure offerings, which are growing in popularity thanks to its Gemini-based solutions, with a cloud backlog that nearly doubled to over $460 billion. Alphabet highlighted that Gemini Enterprise is seeing tremendous momentum, with 40% growth quarter over quarter in paid monthly active users.
Notably, Google’s AI products and tools are built on its Gemini family of AI models, including enterprise agents, workplace automation tools, developer assistants, and AI-powered cloud services.
The cherry on top was that Alphabet stated this was its strongest quarter ever for consumer AI plans, driven by its Gemini app. This pushed Alphabet’s paid subscribers to a record 350 million, including YouTube and Google One (cloud storage subscription).
Alphabet’s Strategic Spend Is Delivering the Goods
Igniting a sharp post-earnings rally in Alphabet stock was that it appears to be capitalizing on the massive spending being seen among the Mag 7 hyperscalers and is starting to provide the clearest justification to keep doing so.
Although Alphabet significantly increased its 2026 capital expenditures (CapEx) guidance due to surging AI cloud demand, it still came in beneath Amazon’s updated commitment of $200 billion and is in line with Microsoft’s plan to spend $190 billion.
Alphabet's CapEx outlook is now $180-$190 billion, with management stating 2027 CapEx will significantly increase beyond these levels. It’s noteworthy that the spending is focused on AI technical infrastructure, including data centers, tensor processing units (TPUs), and cloud capacity.
Justifying the increase in CapEx is that Alphabet repeatedly emphasized that AI infrastructure demand is outpacing available compute, stating its record cloud revenue would have been higher if capacity were available.
Bottom Line
Alphabet’s cloud segment is becoming a serious growth engine as it continues to battle Amazon and Microsoft for market share. With the hyperscale race heating up, AI investments are fueling the broader expansion of these tech giants, and Alphabet appears to be separating itself from the pack.
To that point, Alphabet’s AI products are clearly driving both usage and revenue, and most importantly, its profitability has expanded significantly.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.