For nearly two years, the biggest question hanging over the artificial intelligence (AI) boom has been whether Big Tech’s massive spending spree would eventually translate into stronger earnings or simply become an expensive race for market share. Microsoft’s and Amazon’s latest quarterly results suggest investors may finally be getting their answer.
Both technology giants delivered stronger-than-expected cloud growth while making one message abundantly clear: AI demand is no longer the problem—capacity is. The earnings not only eased concerns over returns on AI investments but also reinforced the view that artificial intelligence is emerging as the next major growth engine for the technology sector.
Microsoft reported 39% year-on-year growth in Azure, while Microsoft Cloud revenue exceeded US$51.5 billion for the first time. More importantly, management said Azure’s growth was constrained not by customer demand but by the availability of GPUs.
Amazon echoed a remarkably similar message. Its cloud division, Amazon Web Services (AWS), reported 37% year-on-year revenue growth to US$42.2 billion, marking the fastest expansion in more than four years. The company also warned that AI demand could exceed available cloud capacity through 2028.
To capitalise on that opportunity, Amazon has increased its planned 2026 capital expenditure to nearly US$220 billion, underscoring management’s confidence that demand for AI infrastructure will remain elevated for years.
The market reaction reflected that optimism. Microsoft shares surged more than 15% after the software giant reported quarterly results, while Amazon climbed 15.3% after posting more than US$62 billion in quarterly profit alongside 20% revenue growth, comfortably beating analysts’ expectations.
Is AI the next growth engine?
According to Ross Maxwell, Global Strategy Operations Lead at VT Market, the latest earnings indicate that the AI investment cycle is beginning to deliver tangible financial returns.
“Some investors have questioned whether the spending on AI infrastructure would translate into stronger earnings. The latest results suggest that we are beginning to see that come to fruition, with strong revenue growth supporting the significant capital investment.”
Maxwell said Microsoft’s diversified business model continues to provide multiple growth engines through cloud computing, enterprise software and AI integration, while Amazon’s strong cloud, retail and advertising businesses leave it well positioned to continue investing in AI without putting undue pressure on profitability. He believes the results strengthen confidence that AI is becoming a meaningful earnings driver, although companies that fail to convert heavy AI investments into revenue growth could find it increasingly difficult to justify premium valuations.
What is the next challenge?
Ponmudi R, CEO of Enrich Money, believes the industry has moved into a new phase where infrastructure investments are beginning to generate measurable commercial returns.
According to Jefferies, global data centre demand is expected to reach 21.1 GW in 2025, while operational capacity is projected at only 8.9 GW, highlighting a significant infrastructure shortfall. The implication, according to Ponmudi, is that the challenge facing the AI industry is no longer building better models alone but expanding data centres, GPUs, networking and power infrastructure quickly enough to meet demand.
He said markets had spent the past two years worrying that AI investment would depress profitability. Rather than slowing investment, major technology companies are stepping up spending because customer demand continues to exceed available capacity.
“The biggest takeaway from these earnings is simple: AI demand is no longer the question. The real challenge is building enough infrastructure to keep up with it.”
Ponmudi believes AI has already progressed through three distinct stages. The first was the excitement surrounding generative AI, followed by a period dominated by massive infrastructure investment. The industry is now entering a third phase, where those investments are beginning to produce meaningful revenue growth.
That transition could also reshape how investors approach the sector.
While questions around valuations and the long-term returns on AI spending are unlikely to disappear overnight, Microsoft’s and Amazon’s latest results have provided the strongest evidence yet that the investment cycle is beginning to translate into business growth.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
