Magnificent 7 Earnings Signal Durable Growth and Broadening Investment Cycle

1. Sustained Growth and Rising Capex Guidance: Meta Platforms delivered another strong quarter, reinforcing a strategy that has remained consistent over recent periods, leveraging AI to enhance engagement and drive better advertising outcomes. The company continues to refine its models to improve ad targeting, user attention, and performance across its ecosystem, while also expanding WhatsApp in developing markets. At the same time, resources are increasingly being reallocated away from Reality Labs toward higher-return AI initiatives.

Financially, results were robust. Advertising revenue reached $55.02 billion, up 33% year-over-year, contributing to total revenue of $56.31 billion, also up 33%.¹ Adj. operating income came in at $22.87 billion, reflecting 30% growth, as Meta continues to scale profitability alongside top-line expansion.²

Capital expenditures remain a key focus. Total capex, including principal payments on finance leases, came in at $18.9 billion, driven by continued investment in servers, data centers, and network infrastructure.³ Looking ahead, Meta raised its full-year 2026 capital expenditure guidance to a range of $125 billion to $145 billion, up from prior guidance of $115 billion to $135 billion.⁴ Part of this increase reflects higher component costs, particularly memory, making it increasingly difficult to distinguish between incremental capacity buildout and inflation-driven cost pressures.

2. Broad-Based Strength with AWS and AI Driving Growth: Amazon delivered a standout quarter, exceeding expectations across nearly every key metric and reinforcing its position as a leader across both retail and cloud. Growth was broad-based, with North America retail sales rising 12% and international retail accelerating to 18%, all while operating margins improved across each segment.⁵

The biggest highlight remains Amazon Web Services, where net sales (excluding FX) grew 28%, marking the fastest pace of growth in several years.⁶ This reacceleration underscores strong demand for cloud infrastructure, particularly as AI-related workloads continue to scale rapidly.

Capital investment continues to ramp meaningfully alongside that demand. Amazon reported total capital expenditures of $43.2 billion in the quarter, driven primarily by AWS and generative AI infrastructure.⁷ Management also indicated that elevated investment levels are likely to persist, reflecting the magnitude of the AI opportunity and its potential to drive long-term revenue growth and free cash flow. For a company of Amazon’s scale, the combination of accelerating growth and sustained investment highlights both the strength of current demand and the confidence in future monetization.

3. Azure Driving Scalable Growth: Microsoft delivered another strong quarter, with Microsoft Azure standing out as the primary growth engine. Azure revenue grew 39% year-over-year, reinforcing Microsoft’s position as a clear beneficiary of accelerating AI adoption. Importantly, the company also quantified the scale of its AI business, noting it has surpassed a $37 billion annual revenue run rate, growing an impressive 123% year-over-year,⁸ highlighting both demand strength and early monetization success.

Investment levels remain elevated but measured relative to expectations. Capital expenditures, including finance leases, totaled $31.9 billion for the quarter, coming in below estimates. Management indicated that roughly two-thirds of this spend was directed toward short-lived assets such as GPUs and CPUs, supporting both Azure demand and the expansion of first-party AI applications, alongside ongoing R&D and server refresh cycles.⁹

Overall, Microsoft generated $82.9 billion in revenue, up 18.3% year-over-year, demonstrating a balanced combination of strong top-line growth and disciplined capital deployment. The results underscore the company’s central role in the AI ecosystem, with cloud and infrastructure investments continuing to translate into meaningful revenue acceleration.

4. Google Cloud Acceleration: Alphabet Inc. delivered a standout quarter, with results reflecting broad-based strength across both its core business and cloud segment. Revenue reached $109.9 billion, up 22% year-over-year, exceeding expectations, while operating income rose 30% to $39.7 billion. Margins expanded meaningfully to 36.1%, highlighting strong operating leverage even as the company continues to invest aggressively in growth initiatives.¹⁰

A key driver of the upside was Google Cloud, where revenue surged 63% year-over-year to $20 billion. Growth was fueled by accelerating demand for AI solutions and infrastructure, reinforcing Google’s position as a major player in the AI ecosystem. Visibility into future growth also improved significantly, with cloud backlog nearly doubling sequentially to $462 billion, over half of which is expected to convert to revenue within the next two years.¹¹

Investment remains elevated as the company leans into this opportunity. Capital expenditures totaled $35.7 billion for the quarter, more than doubling year-over-year, with the majority directed toward servers and the buildout of AI and data center infrastructure. Management also raised its full-year 2026 CapEx outlook to $180–190 billion and signaled a further step-up in 2027,¹² underscoring the scale of commitment required to support long-term AI-driven growth.

5. iPhone Strength and Services Growth Driving Momentum: Apple Inc. delivered a strong quarter, with revenue reaching $111.2 billion, up 17% year-over-year and ahead of expectations. The upside was driven primarily by continued strength in the iPhone, where sales grew 22% year-over-year,¹³ exceeding estimates and reinforcing the durability of Apple’s core hardware franchise.

Beyond hardware, the high-margin Apple Services segment remained a key contributor, generating $31.0 billion in revenue, up 16.3% year-over-year. This mix shift, combined with disciplined cost management, supported better-than-expected profitability, with gross margins coming in at 49.3% and operating margins at 32.3%.¹⁴

Capital allocation also remained a focus, with the company authorizing an additional $100 billion in share repurchases. Notably, management indicated a shift away from its prior net cash neutral target, suggesting greater flexibility for strategic investments, acquisitions, and infrastructure buildout in the years ahead. Looking forward, guidance for the June quarter calls for 14–17% year-over-year revenue growth, well above prior expectations, signaling continued momentum across both products and services.

6. AI CapEx Wave Reinforcing Semiconductors and Industrials: The latest earnings from the hyperscalers point to a powerful and durable investment cycle that extends well beyond technology and into the broader industrial economy. Companies such as Meta Platforms, Microsoft, Amazon, and Alphabet Inc. are collectively guiding to an unprecedented level of capital expenditures in 2026, with individual plans ranging from roughly $125 billion to $200 billion. In aggregate, estimates from Evercore suggest hyperscaler CapEx could approach $900 billion in 2026, representing approximately 86% year-over-year growth, with a path toward $1.1 trillion in 2027.¹⁵

This level of spending has direct and meaningful implications for both semiconductors and industrials. At its core, higher CapEx translates into sustained demand for advanced chips, networking equipment, and memory, reinforcing a strong multi-year tailwind for the semiconductor sector. At the same time, the physical infrastructure required to support this buildout in data centers, power generation, grid expansion, and cooling systems, drives incremental demand across industrial companies.

7. Fixed Income: U.S. Treasury yields advanced higher across the curve last week, supported by persistent geopolitical tensions involving Iran and the April FOMC meeting. The FOMC policy statement revealed a notable degree of internal division, with three policymakers opposing the inclusion of an easing bias, while Stephan Miran dissented in favor of a 25-basis-point rate cut. Chair Jerome Powell also indicated that he intends to remain on the Board of Governors after his term as Chair concludes on May 15th, 2026. By Friday’s close, the 2-, 10-, and 30-year yields were higher by 10, 6, and 5 basis points, respectively.¹⁶

Credit markets strengthened modestly last week, with tightening evident across both the investment-grade and high-yield sectors. Investment-grade spreads moved 1 basis point tighter to +116, while high-yield spreads narrowed 7 basis points to +324. In the municipal market, tax-exempt yields followed treasuries higher, increasing 5-14 basis points across the curve, with the sharpest increases concentrated on the short end.¹⁷

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Return for Selected Indices¹⁸

Sources:

1. Bloomberg: As of April 29, 2026 ↩︎
2. Bloomberg: As of April 29, 2026 ↩︎
3. Meta 10-Q: As of April 30, 2026 ↩︎
4. Meta 10-Q: As of April 30, 2026 ↩︎
5. Bloomberg: As of April 29, 2026 ↩︎
6. Bloomberg: As of April 20, 2026 ↩︎
7. Bloomberg: As of April 29, 2026 ↩︎
8. MSFT Earnings Call: As of April 29, 2026 ↩︎
9. MSFT Earnings Call: As of April 29, 2026 ↩︎
10. GOOGL Earnings Call: As of April 29, 2026 ↩︎
11. GOOGL Earnings Call: As of April 29, 2026 ↩︎
12. GOOGL Earnings Call: As of April 29, 2026 ↩︎
13. Bloomberg: As of April 30, 2026 ↩︎
14. Bloomberg: As of April 30, 2026 ↩︎
15. Evercore ISI: As of April 30, 2026 ↩︎
16. Bloomberg: As of May 3, 2026 ↩︎
17. Bloomberg: As of May 3, 2026 ↩︎
18. Bloomberg. As of May 4, 2026 ↩︎

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