Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Friday. Today is Friday, May 1st. TGIF!
This week was like the Super Bowl for Mag 7 earnings — specifically Wednesday night.
Now there's the story everybody is reading, and then there's what's happening "behind the markets."
Alphabet reported capital spending of $180 to $190 billion in 2026, with 2027 expected to rise significantly.
The stock was up yesterday, and for good reason — killer numbers, especially in their cloud business.
Amazon
AWS put up killer numbers too.
Capital expenditures came in at $43 billion for the quarter alone, with the full year expected to hit $160 billion — and potentially higher next year.
The stock was up, but only marginally.
Microsoft
Killer numbers across the board.
CapEx expected to be around $160 billion, driven heavily by Azure, their cloud business.
The stock sold off a little though, because of the consumer side — specifically concerns around Copilot, their AI integration into Microsoft Word and Office products.
The jury is still out on whether that's actually working for everyday users.
Meta
Revenue up 33%.
That is an astonishing number.
But net income was only up 16%, and capital expenditure guidance came in at $125 to $145 billion — which is very, very high.
The stock was down as much as 10% yesterday.
What These Numbers Are Actually Telling Us
Here is the big picture takeaway.
We are starting to see a clear split in the Mag 7.
Companies that serve corporate clients for their AI buildout — Amazon AWS, Microsoft Azure, Google Cloud — are doing extremely well.
Every smart CEO on earth is rushing to agentify their business right now.
And they are all going to the same place to do it — the companies with the storage, the data, and the infrastructure to make it happen.
That is picks and shovels.
And those businesses are printing money.
There’s one company sitting underneath all of these hyperscalers that most people have never heard of.
Over 6,800 patents that Nvidia, Apple, Google, and Amazon all must license.
Nvidia tried to buy them outright.
The FTC said no.
Every dollar these companies spend on AI infrastructure flows through this supplier one way or another.
On the other side, you have companies like Meta — and half of Microsoft — where Wall Street is asking one simple question: where is the return on all this spending?
The Meta Question
Meta's underlying business is genuinely powerful.
They are already using AI to increase revenue per user — better ad targeting, better engagement, better conversion rates on Facebook and Instagram.
If they were not spending this aggressively, the stock could be trading at a thousand dollars a share.
But they are spending aggressively, and Wall Street still has PTSD from the metaverse.
They spent enormous amounts of money on virtual reality and got almost nothing back.
I understand that argument.
But here is what I keep coming back to.
You don't get to buy great, dominant businesses without problems like this.
The question for Meta investors is simple: what is the end game?
Are they building a cloud business to compete with AWS and Azure?
Are they releasing an LLM to the market?
What does a consumer-facing social network do with $130 billion in annual capital spending?
Zuckerberg didn't answer that question clearly enough on the call.
That is why the stock sold off.
Where I Stand
I remain long these stocks.
I look for opportunities to add more.
Because I know from experience that when Meta decides to tone down spending — one decision — the stock flies.
We saw it happen with the metaverse.
The moment they pulled back from that, the stock went on a historic run.
The story is not yet written.
But the underlying businesses are too powerful to walk away from.
Have a wonderful weekend.
I will see you on Monday.
“The Buck Stops Here,”
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Written by Dylan Jovine