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TODAY’S TECH EARNINGS SHOW LARGE AI SPEND TO CONTINUE

ADMIN || 30th October 2025

Demand for AI keeps growing so fast that the cloud giants are racing to catch up. That was the message from hyperscalers Alphabet, Meta and Microsoft in their results today. The relentless AI boom should prolong rallies for sectors beyond big tech, including power and construction.

When challenged to justify the scale of the company’s investment, Microsoft CFO Amy Hood said the company is building to meet contracts it has already signed and the duration of the contracts matches the lifespan of the GPUs and CPUs it’s installing to service them. It spent $34.9b on capex in the quarter, roughly half of which was on short-lived assets like CPUs and GPUs.

Alphabet meanwhile said its Google Cloud backlog has grown to $155 billion. It was $106 billion a quarter earlier. The company spent $24 billion in the third quarter, about 60% in servers and 40% in data centers and networking equipment, and it increased its expectations for capex this year to $91-$93 billion from $85 billion previously.

Meta more than doubled 3Q capital expenditures, and it sees fiscal outlays at $70b to $72b, up from prior estimates of $69.3b. The firm continues to need more computing power than it had expected. Hyperscalers have been rewarded previously for spending on AI and its anticipated growth prospects, but that’s not the case so far for Meta this earnings season. Meta was down 8% in post market trading.

On earnings front, Alphabet delivered handsomely, Microsoft delivered a small beat while Meta suffered due to a one time non cash income tax charge of $15.9 billion due to the implementation of the tax bill signed into law in July.

Alphabet’s blended forward price-to-earnings ratio as seen in the chart below along with the others climbed from a low of 14 times earlier this year to almost 24 times on Monday. Microsoft and Meta, on the other hand, for all the furor around the AI bubble, aren’t particularly expensive on a historical basis. And none of the three is more than a standard deviation above its long-term average, whether by forward earnings estimates or long-term earnings history.

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