- Cloud infrastructure spending jumped 35% YoY in Q1, Synergy Research Group noted
- Order backlogs from the big three are still ballooning and capex has hit new heights
- Sustained demand from AI means cloud providers will likely be riding the wave for a while longer
AI demand powered blockbuster Q1 2026 results for Alphabet, Amazon and Microsoft. But how much longer will the good times last?
Spending on cloud infrastructure services hit $129 billion in Q1, representing a 35% year on year growth rate, according to Synergy Research Group. “That is the highest growth rate seen since the last quarter of 2021, when the market was only 40% of its current size,” Synergy noted.
Indeed, hyperscalers are still struggling to keep up with demand. Alphabet, AWS and Microsoft’s collective order backlog climbed to a whopping $1.4 trillion, with Google’s alone nearly doubling quarter-on-quarter to more than $460 billion. AWS’ backlog jumped from $244 billion in Q4 to $364 billion in the recent quarter.
Microsoft CFO Anat Ashkenazi said on an earnings call the company is seeing “unprecedented internal and external demand for AI compute resources.” Alphabet CEO Sundar Pichai similarly said there’s “tremendous” demand for both its AI products and infrastructure. And Amazon’s CFO Brian Olsavsky pointed to AI as driving more demand for its core AWS products.
“Our AI revenue is growing triple digits year over year,” Olsavsky said.
Are hyperscalers ramping spending?
To keep up, hyperscalers continued to ramp spending, with Alphabet increasing its full-year capex range by $5 billion to between $180 billion and $190 billion. Microsoft is also looking at $190 billion in capex this year while Amazon has guided to $200 billion in capex in 2026.
But such explosive growth isn’t sustainable – is it?
“Demand is not only strong, it continues to exceed internal forecasts, reinforcing extended tightness,” Circular Technology’s Brad Gastwirth wrote in a note to investors. “The cycle is extending, not peaking. Data continues to suggest duration, not near-term moderation.”
Microsoft seems to see the same trend. Ashkenazi stated on the call that the company, which is nearing the end of its fiscal year 2026, expects its 2027 capex to “significantly increase compared to 2026.”
Synergy Research agreed, with Chief Analyst John Dinsdale noting its forecast calls for “sustained strong growth in the years ahead, with AI continuing to drive usage, unlock new use cases and boost cloud provider revenues.”
And Dinsdale means all cloud providers. Synergy noted that neoclouds already account for 5% of the total cloud market.
As of the end of Q1, Synergy noted Amazon’s market share stood at 28% compared to Microsoft’s 21%, Google’s 14% and Oracle’s 4%. Neoclouds including Anthropic, CoreWeave and OpenAI each had a 1% share. All three, as well as Nebius and Crusoe, were among those with the fastest growth rate.
What is the financial rundown?
Consolidated Alphabet revenue jumped 22% to $109.9 billion, with Google Cloud revenue up 63% to $20 billion. Net income of $62.2 billion was up 81%
Amazon revenue rose 17% to $181.5 billion. AWS achieved a $150 billion annual revenue run rate (or about $37.5 billion per quarter). Net income skyrocketed from $17.1 billion to $30.3 billion.
Microsoft revenue grew 18% to $82.9 billion, with net income of $31.8 billion up 23%. Microsoft Cloud revenue grew 29% to $54 billion, with its AI business hitting a $37 billion annual run rate.