Big Tech Earnings: The AI Boom’s Biggest Winners and Losers

There are two wildly different artificial-intelligence (“AI”) tales showing up in Big Tech’s latest earnings.

On one hand, you have cloud-focused hyperscalers like Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) reporting stellar results that, combined, helped the companies add nearly $1.5 trillion to their market capitalizations.

On the other hand, you have Meta Platforms (META), Apple (AAPL), and Tesla (TSLA) – three tech giants that still don’t seem to know what to do with AI – that lost nearly $450 billion in combined market value after reporting earnings last week.

At this point, the message from Wall Street seems crystal clear: If you don’t have a firm AI strategy already producing tangible financial results, we don’t have faith in your business.

The Cloud-Focused Winners of This Past Quarter: Alphabet, Microsoft, and Amazon

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.

The other is Meta Compute, a division that plans to sell raw compute capacity built specifically for AI computing, as a neocloud provider such as CoreWeave or Nebius does.

Meta’s two-pronged approach – selling both infrastructure access and raw compute capacity – is something AWS, Google Cloud, and Azure simply can’t currently offer.

Given this recent development, it may seem strange to see Meta listed in the “losers” portion of this article.

A look at its recent performance helps explain why:

• Meta’s year-over-year revenue did increase by 28% to $60.8 billion during the second quarter. Still, its costs and expenses skyrocketed by 55% to $42 billion, which drove income from operations down 8% and operating margins down by 12 percentage points.

• Net income fell 14% to roughly $15.8 billion.

• Diluted EPS dropped 13% to $6.18.

• Worst of all, Meta’s FCF plummeted 91% year over year thanks in part to capital expenditures (“capex”) that increased by roughly $14 billion year over year.

The numbers are rough. But the numbers aren’t even the main plot point in Meta’s sad AI story. It’s the decisions that were – and weren’t – made years ago on how to turn AI into a profitable business segment. Amazon, Microsoft, and Alphabet figured it out. Meta is just now putting the puzzle together.

It took Meta until 2026 to realize it could monetize its excess raw AI compute capacity and application programming interfaces (“APIs”) by renting them out to other businesses. It will take some time for this pivot to make an impact on Meta’s balance sheet.

Plus, as Meta continues to invest in building data centers, it does so with the money it makes from its primary advertising business, not to mention plenty of borrowing. Amazon, Microsoft, and Alphabet, on the other hand, use capital generated by a consistent stream of dedicated cloud revenue.

Josh Gilbert, lead APAC analyst at online investing platform eToro, said it best:

Meta is spending like a hyperscaler without a hyperscaler’s business model. Microsoft, Alphabet and Amazon can point their data center dollars at cloud businesses that sell compute straight back out the door, but Meta doesn’t ​have the same outlet, so every dollar of ​build-out leans on the ads business.

This has investors wondering whether or not they’re looking at another Metaverse-like flop. What we do know, however, is that Meta’s AI strategy still isn’t clear, and its second-quarter earnings reflect as much.

Apple

Apple spent a few days in late July reclaiming its position as the world’s most valuable company. It didn’t take long for Nvidia (NVDA) to nudge past Apple again, however. On July 31, Apple lost nearly half a trillion dollars in market value.

Why? Primarily weak fiscal fourth-quarter earnings guidance. Apple’s projected next-quarter growth of 9% to 11% fell short of Wall Street’s roughly 12% expectation. And the primary reason for the soft guidance is a shortage of memory chips and processors that Apple needs for iPhone and Mac computer production.

AI is hoarding these components, leaving precious few for consumer-electronics makers like Apple, forcing them to raise prices and tighten margins. Apple’s outgoing CEO Tim Cook labeled the supply-chain issues as “very significant” during his final earnings call. This all helped push Apple stock down nearly 10% on July 31.

The drop in stock doesn’t negate Apple’s strong third quarter, which included:

• $109.4 billion in revenue, a 16% year-over-year increase
• $29.8 billion in net income, up 27% from last year
• A third-quarter record operating cash flow of $34.4 billion
• $2.02 in diluted EPS, a 29% jump from last year
• A 50.1% gross margin, a year-over-year bump from 46.5%

As far as Apple’s AI strategy is concerned… well, it doesn’t really have one. And that has suited Apple just fine. Unlike most of the other “Magnificent Seven” tech companies, Apple entered the AI build-out fray very quietly and thoughtfully, which is one reason its stock has performed more steadily than the others.

My colleague Jim Royal recently wrote about Apple’s decision to stay out of the AI frenzy, stating:

One of the key takeaways for investors here is that companies can still deliver excellent returns by avoiding the reckless spending that’s driving the AI bubble. By staying focused on its tried-and-true investment discipline, Apple’s management has delivered for shareholders.

Unfortunately for Apple, even as it keeps itself relatively insulated from the day-to-day AI-driven market chaos, it’s still being impacted, primarily through the supply-chain bottlenecks. That alone was enough to contribute to its weak forecast and massive loss in market value.

Tesla

Finally, we have Tesla, which suffered its worst day in years on July 23, following its second-quarter earnings call. The company’s stock lost 14.5% that day, driven by a huge earnings miss, significant cash burn, tight margins, and no real answers or timelines on upcoming production.

Some of Tesla’s second-quarter reporting included:

• A $0.33 non-GAAP EPS that fell well short of Wall Street’s $0.54 expectation

• A 26% year-over-year overall revenue increase

• An operating margin that plunged from an already-tight 4.1% last year to 1.4%

• GAAP net income that fell 5%, while non-GAAP net income nosedived by 17% year over year

But Tesla’s FCF during the second quarter… it was absolutely ghastly. It fell off a cliff, dropping 848% year over year (yes, 848%) to negative $1.09 billion. That’s what $5.8 billion in capex will do to FCF.

Yes, that capex is going toward AI computing and chipmaking infrastructure to support Tesla’s full self-driving systems and its robotaxi and humanoid robotics production. Does that make them worthwhile investments? We’ll see. But it’s quite clear that analysts and investors are growing impatient with Elon Musk’s inability to offer firm details or updates on these projects.

During the second-quarter earnings call, Musk took several questions from investors on these topics, which he has been promoting as life-changing for years. But Robotaxi is only available in limited areas in the U.S., and Optimus is nowhere near ready for consumers to purchase.

Investors wanted concrete answers on rollout timelines, as Musk has missed most of his own target dates… as he is known to do. Instead, Musk talked around quite a bit without providing any real answers, and even brought up the many obstacles Tesla is facing, specifically regarding Optimus.

At a time when consumers may be looking closely at electric vehicles, considering the escalating gas prices stemming from the war in Iran, Tesla is moving away from its automotive success and funneling its capital into AI so Optimus and Robotaxis may someday come to fruition.

Not surprisingly, this isn’t sitting well with investors, as Tesla continues to burn through money with very little to show for it.

What Do These Recent Earnings Mean for Investors?

If you’re considering investing in a company not only with real AI ambitions, but with proven results, substantial revenue, and a solid AI strategy for the coming years, Alphabet, Microsoft, and Amazon look like more certain bets than Tesla, Apple, or Meta.

What’s important to remember, however, is that AI isn’t the only revenue stream for these companies. In most cases, it’s not even their primary revenue source.

Meta has its incredibly successful advertising model, which generates nearly 98% of its total revenue. Amazon’s colossal retail arm accounts for roughly 40% of its revenue, as of last year. In 2025, Google Search & Other brought in roughly 56% of Alphabet’s total revenue. And more than 70% of Tesla’s 2025 revenue came from automotive sales.

Only Microsoft can count AI/cloud business as its biggest revenue driver, with around 39% coming from its Server Products and Cloud Services unit in fiscal 2026.

All of that is to say companies like Meta, Apple, and Tesla aren’t necessarily bad investments. But there are warning signs that shouldn’t be swept under the rug, either.

Year to date, as of August 3, Meta stock was down roughly 11%, and Tesla had plunged 28%. Apple, however, was up around 12%, because it knows what it’s good at – innovating, making high-grade consumer electronics that its customers adore, and locking them into an extremely sticky ecosystem that, well, they also adore.

As for the winners here, Amazon is up roughly 23% year to date, Alphabet has increased 19.3%, and Microsoft is up around 0.8%, mostly due to high AI-related capex in 2026.

The bottom line for investors is that the companies successfully monetizing AI (Amazon, Microsoft, and Alphabet) are in far better shape – AI-wise – than those that are simply throwing money into the AI ether without having a firm, specific strategy for that spending. Looking at you, Mark and Elon.

Regards,

David Engle

Editor’s Note: CNBC nicknamed him “The Prophet.” He called Netflix at a split-adjusted 78 cents, Apple at 38 cents, and Amazon at $2.80 – long before anyone knew their names. He’s appeared on 60 Minutes twice. Now former hedge-fund manager Whitney Tilson is naming what he calls “America’s Greatest Retirement Stock” right now – one company at the center of the AI and energy boom. He’s giving away the name and ticker, free. Click here…