GAFAM NewsMonthly roundup

Big Tech in May 2026: the light and the dark

May 2026: Google I/O remakes search around AI, earnings show real AI cloud revenue, and the dark side of capex, Meta layoffs, Fortnite and a Vermont lawsuit.

First published in Japanese: May 31, 2026
English edition: November 2, 2026

Read the Japanese original on note「GAFAMニュース 2026年5月のまとめ」

The star of May 2026 was, as expected, Google I/O. Across search, Android, AI assistants and developer features, Google showed not “where to put AI” but “how to rebuild existing services on the assumption that AI is there.”

At the same time, the earnings reports that people were reading from late April into May can’t be ignored. The numbers from Microsoft, Amazon, Alphabet and Meta show, quite concretely, where the AI race stands today, through the cloud, advertising and data center investment. Apple kept its AI messaging to a minimum ahead of WWDC in June, while making its presence felt through the resilience of the iPhone and its services.

But as the light has grown stronger, the shadows have grown darker too. Huge investment in AI data centers, layoffs, a long legal fight over the App Store, and lawsuits over the effect of social media on young people. The question that came into view this month isn’t only “what can AI do?”

Who pays the cost, and how much do we leave to giant platforms? From where I perch, that was what worried me most this May.

The light side

Google Search goes from “a place to look things up” to “a place to hand things off”

With I/O 2026, Google pushed AI further into search. AI Mode has grown to more than 1 billion monthly users, and Google announced a new AI-powered search box, continuing conversations, information agents, and features that help with bookings and inquiries. [1]

What matters here is that search is moving away from being just “a tool for finding links” and closer to being “a tool that works behind the scenes once you tell it what you want.” Take travel, shopping, house hunting or restaurant reservations: until now, people made those decisions by going back and forth across pages of search results. As AI search spreads, Google will take on much of the comparing and narrowing down in between.

That’s convenient for users. But for media outlets, e-commerce sites, shops and advertisers, it could mean that an even larger share of decisions happens inside Google’s own screen. For Japanese companies too, it’s a sign that the assumptions behind SEO and advertising are slowly shifting.

Cloud earnings start to show real revenue from AI demand

In the GAFAM earnings that people were reading from late April into May, AI demand showed up quite clearly in cloud revenue.

Alphabet reported first-quarter 2026 revenue of $109.9 billion, up 22% year over year. Google Cloud revenue was $20 billion, up 63%, with enterprise AI solutions and AI infrastructure driving the growth. [2]

Microsoft reported revenue of $82.9 billion for the third quarter of fiscal 2026, up 18%. Microsoft Cloud revenue was $54.5 billion, up 29%, and Azure and other cloud services grew 40%. The company also said its AI business had surpassed an annual revenue run rate of $37 billion, up 123% year over year. [3]

At Amazon, AWS revenue was $37.6 billion, up 28% year over year. According to Amazon, capital expenditures rose mainly because of AI investment, and free cash flow for the trailing twelve months fell sharply, from $25.9 billion a year earlier to $1.2 billion. [4]

In other words, AI is no longer just a matter of demo videos. It’s starting to show up in GAFAM’s numbers as revenue from cloud contracts, GPUs and in-house chips, data centers and AI services for businesses.

Apple shows the strength of its devices and services in the quiet before WWDC

Apple reported revenue of $111.2 billion for the second quarter of fiscal 2026, up 17% year over year. For a March quarter, total company revenue, iPhone revenue and EPS were all records, and services revenue also hit an all-time high. [5]

May wasn’t a month in which Apple said much about AI. It’s natural to read this as Apple carefully saving its announcements for WWDC in June. Even so, the strength of the iPhone, services and its installed base is a foundation that can’t be ignored in the AI era either.

A company that controls the smartphone OS, app distribution, payments, subscriptions and the entry point to personal data is in as strong a position as the companies building the AI features themselves. The more the main battleground of generative AI shifts toward apps and devices, the more Apple’s value as the “front door” will endure.

Meta keeps its earning power with advertising AI

Meta reported first-quarter 2026 revenue of $56.3 billion, up 33% year over year. Ad impressions rose 19% and the average price per ad rose 12%. Family daily active people reached 3.56 billion, so its user base remains enormous. [6]

Meta’s strength is that it can tie AI directly to more efficient ad delivery. Even while its generative AI models and AI assistant are still in the investment phase, ad targeting, creative generation and better recommendations turn into revenue relatively quickly. This is a company whose core business is already funding its AI investment.

The dark side

The bill for AI investment is getting truly enormous

What stood out in this month’s earnings wasn’t only the growth that AI brings. It was the sheer size of the capital spending behind it.

Alphabet explained that AI investment is lifting its business as a whole and pointed to the rapid growth of Google Cloud. [2] Amazon showed AWS growing, while stating plainly that the rise in capital expenditures over the trailing twelve months mainly reflects AI investment. [4] Meta also raised its 2026 capital expenditure outlook from $125 billion to $145 billion, citing higher component prices and additional costs to support future data center capacity. [6]

AI looks like convenient software, but in reality it rests on huge amounts of electricity, land, semiconductors, cooling equipment and the cost of capital. When Japanese companies use cloud AI, this investment race will also come back to them through pricing, exchange rates and the range of services on offer.

The light side of AI is that it lets us do more. The dark side is that this convenience is supported by investment on a scale that only a handful of companies can afford.

Meta’s layoffs reflect a choose-and-focus bet on AI

On May 18, Reuters reported that Meta had laid out details of its May 20 layoffs and restructuring in an internal document. According to the report, the company was pushing ahead with a reorganization to improve its AI workflows, and a plan to cut 10% of its employees had also been reported. [7]

This isn’t simply a cost-cutting story. It means that inside Meta, priorities are being reshuffled among areas close to AI, areas that are easy to turn into products, and areas kept as long-term investments.

The AI boom creates new kinds of jobs, but it also rapidly changes priorities inside companies. Even for giants like the GAFAM companies, betting on AI means letting go of something else.

Fortnite’s return shows the long cleanup after App Store dominance

On May 19, Reuters reported that Epic Games’ “Fortnite” had returned to App Stores worldwide. The conflict between Epic and Apple had run since 2020 and had become a symbolic fight over in-app purchase fees of up to 30% and the App Store’s rules. [8]

For users, the return of a popular game is good news in itself. But from the standpoint of platform power, it’s also part of the long cleanup after a dark chapter.

Apple has kept tight control of the App Store, citing safety, quality and consistency of payments. That control does protect users in some ways, but from the perspective of developers and competing services, it’s a structure in which one company holds a huge front door. Fortnite’s return shows that regulation and the courts are slowly shaking that structure.

For Japanese app businesses, too, this isn’t a distant story. App store fees, external payments, rankings and review criteria bear directly on a business’s margins and how fast it can grow.

On May 26, the US Supreme Court turned away Meta’s appeal in a lawsuit by Vermont’s attorney general alleging that Instagram was designed to be used addictively by young people. That means the state’s lawsuit will go forward. [9]

According to Reuters, the lawsuit is part of a nationwide legal push over the effects of social media on young people. States, local governments, school districts and individuals have filed suits questioning platform design and its impact on mental health. [9]

What’s being asked here isn’t simply “is social media bad?” The question is how far algorithms, notifications, recommendations and advertising models steer users’ behavior, and how much responsibility companies bear for the results.

This isn’t irrelevant to Japan either: children’s smartphone use, social media trouble in schools, and the transparency of online advertising are all live issues there. US lawsuits won’t feed straight into Japan’s rules, but the debate over platform responsibility is clearly spreading.

If I had to sum up GAFAM in May 2026 in a phrase, it was “the month Google I/O showed search for the AI era, and earnings showed the contest of stamina behind it.” Search, cloud, advertising, devices, app stores: in each of these places, AI is being built into existing giant businesses.

But that growth isn’t free. Investment in data centers, the reshaping of work, friction with developers, the effects on young people. The more convenience grows, the more its hard-to-see costs come into public view.

Will GAFAM grow even bigger with AI? Or will its very size draw regulation and distrust? May’s news told us that both are happening at the same time.

🦉 I’m watching for who, behind those bright screens, no longer gets to rest their wings. The brighter AI’s moonlight gets, the more closely I want to look at the shape of the shadows.