Alphabet Even More Bullish on AI

Alphabet reported a 19% year-on-year increase in revenue in constant currencies for the first quarter of 2026 to 110 billion US dollars. Cloud revenues were up 63% to 20 billion dollars, driven by strong demand for AI models, such as Gemini 3, and AI infrastructure "due to continued deployment of TPUs and GPUs."

Alphabet also said its revenue backlog nearly doubled quarter-on-quarter to more than 460 billion dollars, with the majority related to Google Cloud Platform agreements. Just over half of the backlog will convert to revenue in the next 24 months, the company said, with TPU hardware sales beginning to come through as revenue later in 2026, with more in 2027. 

Alphabet said its AI model Lyria 3 has generated more than 150 million songs since launching on the Gemini App in mid February, while Nano Banana 2 has created one billion images in nearly half the time of Nano Banana 1. Alphabet reported it now serves 350 million paid subscriptions, with YouTube and Google One being the key drivers.

The company raised its full year capital spending guidance by five billion dollars to 180 billion to 190 billion dollars, following the recent acquisition of Intersect, which provides data centre and energy infrastructure.

Noting that its strong results "reinforce its conviction" to invest to capture the AI opportunity, Alphabet said it expects its 2027 capex to be significantly higher than in 2026. 

Alphabet's self-driving unit, Waymo, is now operating in 11 US cities and is delivering 500,000 "fully autonomous" rides per week, doubling in less than a year. The company's Wing drone delivery service "continues to expand across the US in partnership with Walmart and Doordash." Source: Alphabet earnings.

T-Mobile US Prepares for Physical AI

As T-Mobile US deploys artificial intelligence (AI) to enhance its radio access network, it is bringing compute capacity closer to end users, Srinivasan Gopalan, CEO of T-Mobile US, noted in an earnings call with analysts. "As we build more AI into our network, we will generate a bunch of fallow compute, especially at the edge. Now the fallow compute plus low latency creates an incredible opportunity because if you're thinking of scale, automation -- it's impossible to do that without low latency," he said. "Low latency has to be essential to any form of robotics or automation that you do."

The telco's 5G Advanced network means it is well placed to serve the demands of so-called physical AI (robotics) systems, John Saw, president of technology at T-Mobile US, added.  "We have a bunch of innovations that we have developed with 5G Advanced to increase spectral efficiencies and capacity like especially for the uplink, which is really needed for physical AI, like things like uplink transmit switching, higher transmit power and uplink MIMO, right?... we believe that we have a multiyear advantage over the competition for this." Source: T-Mobile US collateral

Amazon Talks Up In-House AI Chips

Amazon reported its net sales increased 15% year-on-year on a constant currency basis to 181.5 billion US dollars in the first quarter.  “AWS is growing 28% (our fastest growth in 15 quarters) on a very large base, our chips business topped a 20 billion dollar revenue run rate (growing triple digits year-over-year), advertising grew to over 70 billion in TTM revenue, and unit growth in our stores reached 15% (the highest since the tail end of covid lockdowns)," said Andy Jassy, CEO of Amazon. 

He also claimed that Amazon's Trainium chip, which is designed for AI, will save its tens of billions of dollars of capex each year "and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference." 

Jassy noted that the faster AWS grows, the more short-term capex Amazon will spend. "AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetise it, typically six to 24 months before we start billing customers, depending on the component," he explained. "However, these capex investments fund assets with many year useful lives, 30+ years for data centres, five to six years for chips, servers, and networking gear."

Jassy also cautioned that in times of "very high growth like now, where the capex growth meaningfully outpaces the revenue growth, the early years free cash flow is challenged until these initial tranches of capacity are being monetised and revenue growth outpaces capex growth."

Claiming that billions of people do not have access to broadband connectivity, Jassy said that Amazon Leo, its satellite arm, will "be one of two offerings that are on the current technology edge, and I think that we will have a meaningful advantage in performance. I think we'll be about 2x better on the downlink than existing alternatives and about 6x better on the uplink performance than existing alternatives. I think we'll have a cost advantage for customers."

He suggested Amazon Leo will become a "many billion-dollar revenue business", but will, like AWS, be capital intensive upfront. Source: Amazon earnings call transcript

Tesla Rows Back on Robotaxi Timetable

Tesla reported a 16% year-on-year increase in revenues for the first quarter of 2026 to 22.4 billion US dollars, thanks to growing demand for its vehicles in APAC and South America, and a rebound of demand in both EMEA and North America

Although Tesla expects to begin volume production of its self-driving Cybercab this year, it sounded a cautious note on the rollout of its robotaxi propositions.  "You should expect that initial production of Cybercab and Semi will be very slow, but then ramping up, and going exponential towards the end of the year and certainly next year," CEO Elon Musk said. "We certainly hope to have unsupervised FSD (full self driving) or Robotaxi operating in, I don't know, a dozen or so states by the end of this year. Initially, we're taking a very cautious approach to the rollout here. ... probably unsupervised FSD or Robotaxi revenue will not be super material this year, but I do think it'll be material probably in a significant way next year."

Asked when its FSD (unsupervised) software will be available for customers cars, Musk said: "I'm just guessing here, but probably in the fourth quarter. It's difficult to release this to everyone, everywhere, all at once because we do want to make sure that there are not unique situations in a city that particularly complex intersection. ... I think we would release unsupervised gradually to the customer fleet as we feel like a particular geography is confirmed to be safe."

Tesla reported that paid Robotaxi miles nearly doubled sequentially in the first quarter and it further expanded its unsupervised operation area in Austin and launched unsupervised rides in both Dallas and Houston in April.

Major step up in capex

Tesla's capital spending leapt 67% year-on-year in the quarter to almost 2.5 billion dollars, as it invests to ensure "access to key materials and componentry in each region across vehicle, energy and AI as trade and geopolitics become more uncertain."  

Tesla said it expects to spend more than 25 billion dollars in 2026 on capex, compared to about 8.5 billion dollars in 2025.  "We are paying for six factories which were going to go into operation," noted Vaibhav Taneja, CFO of Tesla. "Some have already started, some would go into operation later part of this year. We're further increasing our investment in AI-related initiatives, including the AI infrastructure to support Robotaxi and the launch of Optimus. We've already started placing orders for the research semiconductor fab in Austin and for solar manufacturing equipment."

In its energy generation and storage business, Tesla said it began meaningful customer deployments of a new solar panel, which has 18 individual power zones – 3x more than a conventional residential panel – enabling it to reliably produce more energy in shady conditions. 

Preparations for Tesla's first large-scale Optimus (robotics) factory are scheduled to start in the second quarter, with significant production set for 2027. "The first generation line, designed for one million robots a year, will replace the Model S and Model X lines in Fremont," Tesla said. "We are also preparing Gigafactory Texas for the second-generation line, which is being designed for long-term annual production capacity of 10 million robots."

Musk said it plans to put a lot of intelligence locally in the robot. "It needs to be enough intelligence that if the robot gets disconnected, like if it's a bad cellular signal or there isn't Wi-Fi, Optimus can't just get stuck. ...The car does not need any cellular or Wi-Fi connection to be able to drive safely." Source: Tesla collateral.

The Cash Generated by the Magnificent Seven

 

In 2025, Alphabet overtook Microsoft to become the biggest cash generating engine in the Magnificent Seven. With six of the seven now generating more than 100 billion US dollars per annum from their operating activities, big tech has the financial leeway to make massive capital investments in data centres and other infrastructure.

Operating Income of the Magnificent Seven

 

In 2025, Microsoft overtook Apple in terms of operating income. But Nvidia is gaining fast.

The Revenue Growth of the Magnificent Seven

 

During this decade, AI chip supplier Nvidia has grown more than tenfold - far, far faster than the major tech giants. But, in absolute terms, Amazon and Alphabet have added more to the top line in the past five years.

The Revenues of the Magnificent Seven

When it comes to revenues, Amazon continues to run well ahead of the other tech giants. In 2025, the aggregate revenues of the Magnificent Seven was 2,373 billion US dollars, up 16% on 2024. In 2024, the aggregate revenues of the Seven grew 12%.

More than One Million Robots now Work for Amazon

In a letter to shareholders, Amazon said it now has one million robots operating in fulfilment centres helping with stowing, picking, sorting and intra-facility transport. The online retailer also reported that Prime Air, its drone delivery service, now has a design that will scale, "with plans to serve communities with 30 million customers by year-end, and expects to deliver half a billion packages by the end of this decade (with an aim to deliver inside 30 minutes)."

Written by CEO Andy Jassy, the letter also noted that AWS’s annual AI revenue run rate was more than 15 billion US dollars in the fist quarter of 2026. Jassy said the second version of Amazon's custom AI silicon (Trainium2) has about 30% better price-performance than comparable GPUs, and has largely sold out. Trainium3, which just started shipping at the start of 2026 and is 30-40% more price-performant than Trainium2, is nearly fully-subscribed, he added. 

"At scale, we expect Trainium will save us tens of billions of capex dollars per year, and provide several hundred basis points of operating margin advantage versus relying on others’ chips for inference," Jassy estimated. "Our annual revenue run rate for our chips business (inclusive of Graviton, Trainium, and Nitro—our EC2 NIC) is now over 20 billion dollars, and growing triple digit percentages year-on-year." 

If Amazon's chips business was a standalone business, and sold chips produced this year to AWS and other third parties (as other leading chips companies do), its annual run rate would be 50 billion dollars, according to Jassy. "There’s so much demand for our chips that it’s quite possible we’ll sell racks of them to third parties in the future."

Source: Amazon shareholder letter