The contest for AI leadership has shifted into high gear – leading the race are three global cloud titans:
- Microsoft’s (NASDAQ: MSFT) Azure,
- Alphabet’s (NASDAQ: GOOGL) Google Cloud Platform (GCP), and
- Amazon’s (NASDAQ: AMZN) Amazon Web Services (AWS).
Accelerating at neck-breaking speed, each commands a lead in different segments of the course, pushing the limits at multiple layers of the AI stack.
For investors, who’s ahead today isn’t as important as whether they can maintain or even extend their lead.
Azure: Broad-Based Demand, Long-Term Contracts
In the second quarter of fiscal year 2026 (2QFY2026), Microsoft’s Cloud revenue increased 26% to US$51.5 billion, with contributions from a 39% increase in Azure and other cloud revenue.
However, Microsoft’s 2QFY2026 capital expenditure (CAPEX) increased by a whopping 66% year on year (YoY) to US$37.5 billion, casting doubts on the sustainability of the company’s growth.
Still, its backlog of US$625 billion, up 110% YoY, indicates demand for Azure services far exceeded supply.
This supports Azure’s future growth.
Although OpenAI accounted for 45% of Microsoft’s backlog, the non-OpenAI portion still grew 28% YoY, reflecting broad-based demand for Azure.
Similar to Alphabet, Microsoft is pursuing a vertically-integrated stack, from developing its custom Maia 200 AI accelerators, to integrating Copilot to Microsoft 365 and other product suites.
Although a significant portion of Microsoft’s data center assets are somewhat short-lived, the company has been able to prolong the useful lives of older GPUs through sophisticated software layers.
This mirrors NVIDIA’s (NASDAQ: NVDA) use of CUDA.
GCP: Ramping CAPEX Amid Rising Backlogs
In the fourth quarter of 2025 (4Q2025), Alphabet’s Cloud segment revenue increased 48% YoY to US$17.7 billion, with GCP’s growth being at a much higher rate.
Alphabet’s capex in 4Q2025 was up 95% from a year ago to US$27.9 billion, with capex for the whole year of 2025 reaching US$91.4 billion.
As GCP’s backlog grows – it was up 55% sequentially to US$240 billion in 4Q2025 – Alphabet’s capex in 2026 is projected to be US$175 billion to US$185 billion, around double from 2025’s level.
Alphabet is seeing broad-based demand for its AI offerings such as its latest Gemini models and Ironwood TPUs.
Despite the sharp increase in capex, Alphabet is driving efficiencies through the proliferation of AI across its business:
- After a decade-long vertical build-out of its AI offerings, including its TPUs, Alphabet’s vertically optimised AI offerings were 75% utilised by its Cloud customers.
- Revenue from products built on GCP’s proprietary AI models – such as Gemini, Imagen, and Veo – grew nearly 400% YoY in 4Q2025.
- Through model and TPU optimisation, the costs to run Gemini were lowered by 78% in 2025.
- Within just two months of its launch, Google Antigravity, an agentic software development platform, has reached more than 1.5 million weekly active users.
Overall, among Alphabet’s AI-powered products and services, 14 products were observed to have annual revenues exceeding US$1 billion, reflecting material adoption of the company’s AI offerings.
AWS: Massive CAPEX, Massive Growth
AWS revenue surged 24% YoY to US$35.6 billion in 4Q2025, which was the fastest growth in 13 quarters.
This growth momentum comes amid Amazon’s capex reaching US$39.5 billion in 4Q2025, representing a 42% YoY increase.
For the whole of 2025, Amazon’s capex was a staggering US$131.8 billion.
There’s more.
Amazon’s projected capex for 2026 is expected to be US$200 billion, which is up 51.7% to around US$200 billion YoY, driven by demand for both core and AI workloads at AWS.
The demand can be seen in Amazon’s backlog increasing 40% YoY to US$244 billion.
Amazon’s capex already has notable results to show:
- AWS’s Trainium and Graviton chips are collectively at a US$10 billion annual revenue run rate and growing triple-digit percentages YoY.
- Amazon Bedrock, a fully-managed service for companies to use frontier models to build AI apps, is already utilised by over 100,000 companies and boasts a multi-billion-dollar annualised revenue run rate, with customer spend growing at 60% sequentially in 4Q2025.
- Amazon Connect, which is AWS’s Contact Centre as a Service (CCaaS) product, reached a US$1 billion annualised revenue run rate in 4Q2025, and is growing at 30% YoY.
- The number of developers using Kiro (Amazon’s AI coding agent) to complete debugging tasks autonomously grew more than 150% QoQ in 4Q2025.
Get Smart: A Triumvirate of Winners
All three cloud providers share a common trend in their latest earnings – over 20% cloud revenue growth, with escalating capex.
Despite their mounting expenditure, investors should not lose sight of the fact that all of them operate highly profitable, cash-rich business models with fortress balance sheets.
Such financial firepower arms them with formidable war chests to fund costly AI ambitions – something only a handful of companies can realistically sustain.
These structural advantages justify their meteoric ascent to multi-trillion-dollar valuations.
Rather than expecting just one winner, is it too much to bet on all three to win?
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Disclosure: Larry L. owns shares of Alphabet, Amazon,Microsoft and NVIDIA.
