Amazon and Alphabet Pour Billions into AI Infrastructure: Who Will Win the Profit Stakes?

Amazon and Alphabet are spending big on AI infrastructure, with a combined total of nearly $400 billion earmarked for this year. The two companies' cloud arms have accelerated growth, with Amazon Web Services (AWS) posting 37% revenue growth in the second quarter of fiscal year 2026, and Google Cloud jumping 82%. AWS' operating margin reached 39.4%, while its backlog hit $496 billion.

Google Cloud also saw significant growth, with a backlog reported at $460 billion. Sundar Pichai noted that nearly 90% of the Fortune 100 are using Gemini Enterprise and Gemini processing 22 billion API tokens per minute. Search still funded the buildout, contributing $63.27 billion in revenue, up 17%.

The big question is which company will be able to turn this massive spending into profit first. Amazon's free cash flow is negative $7.6 billion on a trailing basis, while Alphabet has seen its long-term debt jump from $46.5 billion to $98.2 billion due to its vertically integrated stack.

Alphabet's vertical integration allows it to keep operating margins high, despite doubling capital expenditures. In contrast, Amazon runs a 'bring-your-own-model' shop, hosting third-party models on Bedrock. The company is also pursuing its own frontier model, but the pitch is choice.