Investors (in)digested results from some of the world’s largest technology-focused companies this past week. All three major companies (AMZN, GOOG, and MSFT) traded lower the day after their respective earnings reports. Alphabet’s results in particular spooked investors, with a lackluster price reaction perhaps explained by weakening fundamentals. Amazon, however, provided a rare long-term view of the potential growth of its cloud computing business.
Alphabet’s Weak Results
Shares of Alphabet were hit the hardest of the three hyperscalers following their respective earnings reports, with shares of the world’s largest search engine company declining 12.6% on Thursday. Fundamental investors were negatively surprised by the results posted from Alphabet’s core Search revenue, as shown in the chart below. Actual results of $82.0 billion in revenue in this segment missed FactSet consensus expectations of $83.6 billion, a -1.9% miss compared to expectations. This was the largest fundamental miss for Alphabet’s Search segment since the bear market of 2022.
These weak results also stand in firm contrast to Alphabet’s closest advertising-based competitor, Meta Platforms. Meta’s results showed a 2.0% beat compared to their FactSet consensus advertising-based revenue expectations. Such a large divergence in results compared to expectations seems to have prompted investors to question the narrative of investing in Alphabet.
Those investors who are bearish on Alphabet shares may be viewing this quarter’s lackluster results as clear evidence that Google’s ’10 blue links’ interface is losing relevance in the Age of AI, and chatbots that can produce answers instead of links may be where the next generation of internet growth is produced.
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Those more bullish on Alphabet, however, may find solace in the words of Alphabet Chief Business Officer Philipp Schindler, who painted a picture of ‘transition, not displacement’ as the company works to better monetize and develop its own AI offerings. Mr. Schindler noted on the company’s earnings call that “We also want to enhance, not just automate away, the discovery experience that people frankly love in so many cases…We’re confident that we can actually provide really interesting compelling advertising models for agentic use cases.”1 Although Alphabet is working to improve and iterate their AI offerings, the stock’s sour reaction to earnings may be an indication that investors have questions – and doubts – about the transition for now.
Amazon’s Bullish Outlook
Amazon stock traded slightly lower the day following the company’s earnings report. But key forward guidance may have helped investors gain confidence in the long-term potential of Amazon’s cloud computing business, AWS.
Amazon Web Services reported revenue of $45.98 billion (and growth of 39.3% compared to last year), which beat FactSet consensus expectations by about 1.0%. This represented AWS’ highest year-over-year growth since late 2021.
Investors may have felt further reassured by the longer-term vision for AWS provided by Amazon CEO Andy Jassy. Mr. Jassy spoke to the magnitude and durability of potential growth for AWS during the company’s earnings call by noting “AWS can growth north of 40% in each 2027 and in 2028 and be a $1 trillion revenue business in the next 5 to 10 years.”2
Current FactSet Consensus estimates show the street is expecting AWS’ 2031 revenue to be $640 billion, implying that if the company is able to achieve this $1 trillion in potential revenue in just 5 years, it would potentially represent significantly faster growth than is currently expected. This foresight may have helped investors gain confidence behind Amazon’s large data center investments.
While both Amazon and Alphabet stock traded lower following their respective earnings reports, both companies spoke to their focus on transitioning to and growing with AI’s capabilities. For some companies like Alphabet, investors worry that this change may bring disruption to their current business. And Amazon’s results and outlook spoke to accelerating revenue growth in the short term and offered a view that the next 5-10 years may see significant continued growth.
- https://finance.yahoo.com/quote/GOOG/earnings/GOOG-Q3-2026-earnings_call-712854.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAKAfaPOyLiMOxu_CLk0NWOos04lQLdT3pX4k9pl35G6ROgfl6MuX2xMvPBfXtOWcUw0Vkgo33Zp2hv4Aln0dmpeOqwca1bYzv1YHB-C-AYhWYCPjN-fMRyGkaHUil4eK93iBUSNEiTB4C02aJ-p0qZNXowpMbPGFQhqIJDTDAivK
- https://finance.yahoo.com/quote/AMZN/earnings/AMZN-Q3-2026-earnings_call-720308.html
For more content by Blake Anderson, CFA®, Director, Portfolio Management, click here.
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