Cloud Giants Diverge on Capex Digestion
Amazon and Alphabet's cloud businesses have set new records for growth in Q2 FY2026, but their funding strategies are leading them down different paths. Amazon's AWS reported a 36.7% year-over-year revenue increase to $42.2 billion, with operating income of $16.6 billion on a 39% margin.
Alphabet's Google Cloud, on the other hand, grew faster at 82%, but its backlog and funding strategy raise concerns. The company has raised $70 billion in combined equity and debt to fund its $195 billion to $205 billion capex guidance for the year.
Jassy framed the payoff for AWS: servers reach break-even in a little less than three years, and data centers carry 30-plus year useful lives. However, interest expense is already up nearly 5x year-over-year at Alphabet, making timing a crucial factor in its ability to absorb capex.