Alphabet Outshines Amazon on Custom Silicon, but Cloud Growth Slows

Alphabet and Amazon both reported Q2 FY2026 results that were heavily influenced by their respective relationships with NVIDIA. Both companies spent enormous amounts on capital expenditures, with Alphabet spending $44.92 billion and Amazon spending $54.21 billion. However, the key difference between the two is who owns the silicon underneath.

Google Cloud grew 82% year-over-year, while AWS grew 37%. Alphabet's cloud operating margin was 35.6%, compared to Amazon's 39.4%. Sundar Pichai stated that Alphabet's first priority is making sure it has what it needs to compete at the frontier, and then routing external customers to a mix of TPUs and NVIDIA GPUs.

Alphabet designs its own custom silicon, including TPUs for training and serving Gemini, while Amazon executes differently. Andy Jassy said that Amazon's AI and Chips businesses each eclipsed run rates of more than $25 billion, and Project Rainier now runs 500,000+ Trainium2 chips for Anthropic.

The balance sheet is where this gets real, with Google's free cash flow falling to negative $5.86 billion and long-term debt jumping from $46.5B to $98.2B. Alphabet raised its full-year 2026 capex guidance to $195 billion to $205 billion, while Amazon guided higher at roughly $200 billion.