Megacap Earnings Preview: Microsoft, Alphabet and Amazon

Three of the biggest names in the AI trade report this week, and after Meta's results rattled the market last week, the bar for reassurance is high.

Microsoft and Alphabet report after the close on Wednesday, the same day as the Fed's interest rate decision, followed by Amazon on Thursday. The Nasdaq 100 fell 2.8% last week, leaving it more than 7% below its 6 October record.

Meta Shows the Market's New Mood

Meta's results last week showed how little benefit of the doubt investors are now giving to AI spending.

Revenue rose 26% to $64.6bn, ahead of forecasts, but third-quarter capex hit $34.9bn, free cash flow turned negative and Meta raised the bottom of its 2026 spending range to $135-145bn. The shares rose in after-hours trade, but dropped nearly 7% on Thursday as the Philadelphia Semiconductor Index slumped 6.7%, and Meta ended the week down almost 13%.

Mark Zuckerberg admitted that "it's going to be very important to get the math on all of this to work out," and that same question hangs over Microsoft, Alphabet and Amazon. Alphabet alone has lifted its 2026 capex forecast to $195-205bn, so investors want proof that cloud revenue is growing fast enough to justify the bill.

Defensives Take the Lead

The tech wobble has also exposed how much the market has relied on a handful of megacaps.

The equal-weight S&P 500 has edged higher in each of the past two weeks while the Nasdaq 100 has fallen more than 8%, with healthcare and consumer staples doing the heavy lifting instead. That rotation has kept the broader market steadier, but with the S&P 500 still dominated by megacap tech and trading below its 50-day moving average, this week's results will go a long way towards deciding its next move.

Wednesday's Fed decision adds another layer of risk. Markets expect rates to stay at 3.75%-4.00% after September's hike, but with inflation running at 3.7%, any hint of another increase in December could push yields higher just as the megacaps report.

Microsoft (MSFT)

Microsoft has guided for Azure growth of around 45% in constant currency this quarter, up from 43% last time, with its Microsoft Cloud business now bringing in close to $60bn a quarter. The catch is spending, with quarterly capex guided at more than $50bn, and the shares have often fallen even after Azure beats, so the outlook for capacity and margins may matter more than the headline numbers.

Alphabet (GOOGL)

Google Cloud has become one of the fastest-growing businesses in Big Tech, with revenue up around 82% in Q2, while Search has so far held up against AI chatbots. However, Alphabet raised its 2026 capex forecast to $195-205bn, and the shares fell 7% after its July results and another 8% last week, so investors will want to see Cloud margins holding up as spending climbs.

Amazon (AMZN)

Amazon Web Services grew around 37% in Q2, its fastest pace in four and a half years, and Amazon has guided for Q3 sales of $197-202bn, with consensus sitting right at the top of that range. With capex running at record levels and free cash flow over the past year in negative territory, the focus will be on whether AWS can keep accelerating enough to justify the spending.