AI Revenue, Please
A quartet of Mag 7 earnings... Alphabet emerges as the winner... The market is demanding AI revenue, not just spending... But it's all good for GDP... The war in Iran meets an important deadline...
The Magnificent Seven results are coming in...
After markets closed yesterday, four of the Magnificent Seven stocks released their quarterly earnings reports.
The four companies – Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META), and Microsoft (MSFT) – have a combined $12 trillion in market cap and make up 20% of the S&P 500 Index.
And so, as we wrote earlier this week, we're tracking these results and the market's reaction to them...
On the surface, all four companies are thriving... And based on today's market action, you might think all is well. All of the major U.S. stock indexes were higher today, with the benchmark S&P 500 up about 1% to a record close.
But the story about the Mag Seven is more mixed when you start to dig into the details of these companies.
Today, Meta shares lost more than 8%, Microsoft fell almost 4%, and Amazon rose slightly. Only Alphabet gained big, with shares up roughly 10% to a new all-time high.
Each company beat Wall Street's earnings and revenue expectations...
They're all still growing at high rates, too. Meta led the way, growing revenue by 33% year over year in the quarter. Alphabet, Microsoft, and Amazon weren't too far behind – growing revenue by 22%, 18%, and 17%, respectively.
As our colleague and Stansberry's Investment Advisory editor Whitney Tilson has written in the past, it's incredible that companies of this size are still growing so quickly.
Whitney shared his updated thoughts on Alphabet and Meta – two of his longtime favorite tech giants – in his free daily e-letter today, writing that they both had "stellar earnings overall." On Alphabet, Whitney wrote...
The bigger story was Google Cloud, with $20 billion in revenue – up a staggering 63% YOY. And, if anything, growth looks to accelerate from here based on its backlog, which is now $460 billion...
Google Cloud is also highly profitable, with operating profit coming in at a record $6.6 billion – triple last year's level.
Alphabet's total costs and expenses grew 18%, slightly slower than revenues. That caused operating margins to expand from an already high 34% to 36%.
While everyone's headline numbers were good, Wall Street was also focused on the companies' forecasts for spending, AI included... And none of these companies disappointed with its guidance...
- Microsoft sees $190 billion in capital expenditures ("capex") this year, up 60% from 2025.
- Meta raised its capex forecast for 2026 to a range of $125 billion to $145 billion, up from the previous range of $115 billion to $135 billion.
- Amazon maintained its forecast of $200 billion in capex this year.
- Alphabet now sees its full-year capex coming in at $180 billion to $190 billion, up from its prior outlook of $175 billion to $185 billion.
Altogether, these companies now plan to spend $710 billion on capex this year – just about double what they spent last year. And the trend could continue in 2027...
Alphabet Chief Financial Officer Anat Ashkenazi said that capex would "significantly increase" next year over 2026 – which was already double Alphabet's 2025's spending. But it's not just Alphabet. We'll likely see spending increase across the board two years out from the tech giants.
Analysts at Morgan Stanley now expect nearly $800 billion in hyperscaler capex this year, growth of 78%. Then it would increase to $1.1 trillion in 2027.
This is 'good' for the economy – on the surface...
This morning, the Bureau of Labor Statistics released its latest estimate of America's gross domestic product ("GDP"). The data shows that investment in Information Processing Equipment – a component that tracks AI investment – contributed about 0.8 percentage points to GDP growth in the first quarter.
The entire economy grew 2% in the quarter, meaning AI investment accounted for more than 40% of all economic growth.
That's just about in line with what AI spending contributed to the economy in the first nine months of 2025, according to a report from the St. Louis Federal Reserve.
Federal Reserve Chair Jerome Powell referenced this trend in his press conference yesterday. When he was asked why the economy appears "resilient" given challenges like, most recently, the oil price surge due to the war in Iran, Powell said...
Some of that is that consumer spending is hanging in pretty well. The most recent data are good. And some of it is just the apparently insatiable demand for data centers all over the United States. [There's] a lot of business investment going into building data centers, and [there's] every reason to think that that continues.
That last part may or may not be true... But as long as the hyperscalers keep spending, they put a "floor" under economic growth.
Capital efficiency is a different story...
As we wrote in February, big tech companies' AI investments have made them a lot less capital efficient over the past few years. From the February 9 Digest...
Only one of the four big companies – Microsoft – is expected to be able to cover its capex with the cash it generates from its operations this year. That means the rest are going to have to come up with the money another way – like with new debt or share offerings.
And that's still the case today.
In the first quarter, Amazon only generated about $1 billion in free cash flow ("FCF") – down 95% from the same quarter last year. And with its newly increased capex guidance, Wall Street now expects Meta Platforms to run at a FCF deficit this year.
That would mark the company's first year of negative FCF since it went public in 2012.
These were companies that generated huge amounts of FCF because their Internet-based business models allowed them to scale so effectively. And their stocks have commanded premium valuations as a result.
Now, they're losing the capital efficiency that made them such good investments over the past 15 years.
The AI spending train is still going, but the companies fueling it are running out of time to show the payoff. The market is now demanding AI revenue, not just spending... or, failing that, enough growth elsewhere to justify those spending plans.
That's why two of the four hyperscalers' shares fell, and another was little changed, after these apparently strong headline reports.
Lastly, today, our latest war update...
Subscriber Debbie F. gets us started about the war in Iran with a question...
Isn't there a 60-day limit coming up, at which point Congress MUST approve this? I understand that the President can ask for up to 30 days for a graceful withdrawal. But still. The 60 days should be up on May 1... Seems to me that this might actually matter.
Yes, that is all correct.
The 60-day limit – for deploying U.S. armed forces without congressional authorization, part of the War Powers Resolution of 1973 – is coming up tomorrow. The law allows for 30 more days to withdraw troops, but no new combat without Congress' OK.
Perhaps that will happen. But maybe not.
That's why today, according to multiple reports, the U.S. military was considering options for a final burst of attacks on Iranian targets before the 60-day deadline. A proposed special forces mission to get Iran's enriched uranium, probably the biggest sticking point of a resolution, was also to be presented to President Donald Trump.
In any case, though, the Strait of Hormuz could remain effectively or at least partially closed.
If the U.S. military keeps its blockade in place – which we figure will be at least attempted – expect the status quo to remain. That means little shipping traffic and rising oil prices.
Even if the U.S. pulls out of direct hostilities for whatever reasons, few shippers will want to risk traveling the Persian Gulf waters. Plus, energy infrastructure in places like Qatar, the United Arab Emirates, and Saudi Arabia has already been damaged, which means a "return to normal" won't happen imminently.
In the end, the market impact comes down to oil prices and the general path and pace of inflation over time. Both have been trending higher, and the global benchmark for oil just hit a four-year high. This behavior probably won't reverse overnight.
New 52-week highs (as of 4/29/26): Atlas Energy Solutions (AESI), Simplify Managed Futures Strategy Fund (CTA), Flex LNG (FLNG), Helmerich & Payne (HP), Idex (IEX), Intel (INTC), Keyence (KYCCF), Liberty Energy (LBRT), Plains All American Pipeline (PAA), Invesco Oil & Gas Services Fund (PXJ), Starbucks (SBUX), USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI), Tenaris (TS), Valaris (VAL), and Viper Energy (VNOM).
In today's mail, feedback on yesterday's Digest, which included reports on a robot visiting our offices and Jerome Powell's final meeting as Fed chair... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"The Unitree robot is incredible and absolutely terrifying. I can see criminals programming it to mug people or worse and get away with it. Welcome to dystopia." – Subscriber S.J.I.
"The Fed is its own worst enemy! They are driving the bus looking thru the rear-view mirror. That's their business model. Instead of looking forward and steering the economy into the future as companies currently do! They are constantly staying too long in interest rate lows and overshooting days/months into interest rate highs. Now they have shot themselves in the foot because they are stuck between a rock and a hard place with nowhere to move. They did the unthinkable during [the pandemic] and printed money like a drunken sailor!
"Now we are $37? TRILLION dollars into a massive debt bomb that our great, great-grandchildren are going to carry around their entire life! Way to go government IDIOTS!
"We need to go back on the gold standard! If for no other reason than to control spending by people in our government who don't have the mental capacity to do it themselves. And do away with the Fed! The free marketplace can determine the interest rate and do a much better job of it. If the Fed was a publicly held company, it would have gone bankrupt decades ago." – Subscriber Jon M.
Corey McLaughlin comment: I appreciate the passion and the sentiment, Jon. I just want to make two small points, which probably won't make you any happier... First, the national debt is now closer to $39 trillion. And second, along with the Fed, fiscal policy from various administrations on both sides of the aisle is to blame, too.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
April 30, 2026