Big Tech in July 2026: the light and the dark

Good evening. The Owl here.

For GAFAM, July 2026 was the month the earnings numbers showed both the payoff and the weight of AI investment.

Microsoft, Alphabet and Amazon all posted strong growth in cloud and AI-related services. Apple doesn’t stand out much in AI, but it delivered a record June quarter, driven by iPhone, Mac and Services.

Meanwhile, Meta’s profit and cash flow came under pressure from AI infrastructure spending and legal costs. Microsoft announced job cuts of about 4,800 people, and Google and Apple both came under heavy pressure from EU regulation.

The thing to watch in July: where exactly are these companies going to earn back their AI investment?

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July earnings: a scorecard of AI investment

First, here is an at-a-glance summary of each GAFAM company’s earnings and where its AI investment stands, drawn from their results.

The companies don’t disclose “AI investment” in the same way, so please be careful if you compare the amounts.

I’ve organized the table around one question in particular: through which business does each company plan to earn back its AI investment?

Company	The light in July earnings	AI and capital spending	Assessment
Alphabet	Revenue up 24%, Google Cloud up 82%, Cloud backlog of $514 billion. [1]	Reported to have raised its 2026 capital spending outlook to $195–205 billion. [10]	Cloud growth is strong. But the investment is also very heavy; the key question is how much of it AI search and Cloud can recoup.
Microsoft	Revenue up 18%, Microsoft Cloud up 27%, Azure up 43%. Microsoft 365 Copilot paid seats above 30 million. [2]	Quarterly capital spending of $41 billion. About two-thirds described as relatively short-lived assets such as CPUs and GPUs. [11]	The clearest path to payback. With Azure and Copilot growing, the investment is easy to explain.
Amazon	Revenue up 20%, AWS up 37%. AWS’s AI business and chips business each above a $25 billion annualized run rate. [3]	Reported to have raised its 2026 capital spending plan from $200 billion to about $220 billion. [12]	The investment is very heavy, but with AWS and chips growing, it makes a convincing case as the behind-the-scenes AI infrastructure company.
Meta	Revenue up 28%, advertising revenue up 27%, Family daily active people at 3.60 billion. [6]	2026 capital spending outlook of $130–145 billion. Quarterly capital spending of $31.08 billion. [6]	The AI effect on ads is visible. But it lacks a direct payback channel like cloud revenue, making it the hardest to explain to investors.
Apple	Revenue up 16%; double-digit growth in iPhone, Mac, Services and every region. [4]	Its AI spending is hard to see separately. The focus is on building AI into devices, the OS, services and R&D rather than large cloud buildouts.	The investment burden looks relatively light. On the other hand, the payoff of its AI strategy is still hard to read in the numbers.

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The light side

Alphabet shows strong growth from AI search and Google Cloud

In its second-quarter 2026 results on July 22, Alphabet reported revenue up 24% year over year. CEO Sundar Pichai said Search & other revenue grew 17%, YouTube ads 13% and Google Cloud 82%. He also said Cloud’s backlog had reached $514 billion and that Gemini Enterprise is used by about 90% of Fortune 100 companies. [1]

July’s results showed two things happening at once: the search experience is changing, with AI Overviews and AI Mode, and search ad revenue keeps growing.

Since AI first took off, people have worried that AI search would break the traditional search ad business. I think it’s fair to say that fear has now been put to rest.

Microsoft shows what AI monetization looks like with Azure and Copilot

On July 29, Microsoft reported results for the fourth quarter of fiscal 2026. Revenue was $90 billion, up 18% year over year, and Microsoft Cloud revenue was $59.3 billion, up 27%. Azure and other cloud services grew 43%. CEO Satya Nadella said Azure’s annual revenue topped $100 billion for the first time and that Microsoft 365 Copilot paid seats passed 30 million. [2]

Microsoft’s strength is that AI rides easily on top of its existing enterprise contracts. Copilot comes inside Microsoft 365, and Azure powers companies’ AI use, so its path to monetization is easy to see.

Amazon grows “behind-the-scenes AI” with AWS and AI chips

In its second-quarter 2026 results on July 30, Amazon reported revenue up 20% year over year to $200.6 billion, and operating income up 43% to $27.5 billion. AWS revenue grew 37% to $42.2 billion, its fastest growth rate in 18 quarters. The company said AWS’s AI business and its chips business have each reached an annualized revenue run rate of more than $25 billion. [3]

Amazon’s AI doesn’t have a prominent consumer face the way ChatGPT or Gemini do. But through enterprise platforms like AWS, Trainium and Bedrock, it is capturing AI demand deep down.

Apple stays quiet on AI but shows the strength of its core business

On July 30, Apple reported results for the third quarter of fiscal 2026. Revenue was $109.4 billion, up 16% year over year, and diluted EPS was $2.02, up 29%. CEO Tim Cook said iPhone, Mac, Services and every geographic region grew by double digits, making it the company’s best June quarter ever. [4]

When it comes to AI, Apple isn’t out front the way Microsoft and Google are. It did announce Siri AI at WWDC26, but July’s headline was the steady growth of iPhone, Mac and Services. Owning the device and the OS is a big advantage when it comes to bringing AI into everyday life.

Google DeepMind extends AI into robot bodies

In July, Google DeepMind announced Gemini Robotics 2, described as a family of AI models that give robots whole-body control, dexterous manipulation and coordination across multiple robots. [5]

Robotics is a hard field, with tough problems in safety, cost, durability and handling exceptions. Even so, Google keeps investing in extending AI into manipulating the physical world.

The dark side

Meta’s ads are growing, but the weight of AI investment stands out

On July 29, Meta reported its second-quarter 2026 results. Revenue was $60.8 billion, up 28% year over year, and advertising revenue grew 27%. Family daily active people reached 3.60 billion, so its user base is still strong. [6]

However, net income fell 14% to $15.8 billion, and EPS fell 13%. Expenses rose 55%, with legal costs and layoff-related charges also weighing on results. Capital expenditures were $31.08 billion, and free cash flow came to just $784 million, down sharply from $8.549 billion a year earlier. [6]

Meta puts its 2026 capital spending outlook at $130–145 billion. The AI effect on ads is visible, but investment in data centers, servers and people is squeezing its cash.

Microsoft cuts 4,800 jobs behind strong results

On July 6, Microsoft announced it would eliminate about 4,800 roles, roughly 2.1% of its global workforce. The company said the goal is to concentrate its people, investment and energy on priority areas. [7]

Microsoft stated explicitly that these cuts are not about replacing people with AI. Still, AI is changing how work gets done, and where companies place their people and their investment is starting to shift too.

EU fines Google €890 million for breaching the DMA

On July 23, the European Commission fined Google a total of €890 million for breaching the Digital Markets Act (DMA). The breakdown: €460 million for favoring its own services in Google Search, and €430 million for restricting app developers on Google Play from steering users to purchase options outside the store. [8]

The more AI search spreads, the more power Google has over what appears at the top of its screens and which services it sends people to. With AI search, that problem may become even harder to see.

Apple fails to overturn the EU’s “gatekeeper” designation for the App Store and iOS

On July 8, Apple lost a lawsuit over the EU’s Digital Markets Act. The EU General Court rejected Apple’s challenge to the designation of the App Store and iOS as “gatekeepers” under the DMA. [9]

Apple’s strength is that it controls hardware, the OS, the App Store, payments and privacy design as one integrated whole. But the EU’s view is that if that integration hinders competition, Apple should open the door to outsiders too. The deeper AI reaches into the OS, the weightier this issue becomes.

AI investment is turning Big Tech into capital-heavy companies

Amazon’s spending on property and equipment rose, mainly because of AI investment, and its free cash flow for the trailing twelve months was an outflow of $7.6 billion. [3] Meta’s AI infrastructure investment pushed its quarterly capital expenditures to $31.08 billion, and its free cash flow dropped sharply. [6]

GAFAM have long been seen as high-margin software and advertising companies. But to keep winning in AI, they need physical infrastructure: cloud, chips, data centers and power.

Companies whose revenue shows up first get rewarded; companies whose spending stands out get doubted.

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Looking back at GAFAM in July 2026, AI has worked its way into almost everything: search, cloud, advertising, smartphones, robots, workforce restructuring and even regulatory battles.

The light is that AI is translating into growth in revenue and usage. The dark is what it costs to get there. July was a month when the question wasn’t only “whose model is smartest” but also “who can earn back the investment.”

🦉 I sometimes think you can tell how serious a company is not by how bright its light is, but by how deep its shadow runs. The more a company burns, the more clearly it needs to show what it intends to light up.

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References

[1] Google Blog: Alphabet earnings call Q2 2026: Sundar Pichai remarks

[2] Microsoft Investor Relations: FY26 Q4 Earnings Release

[3] Amazon Investor Relations: Amazon.com Announces Second Quarter Results

[4] Apple: Apple reports third quarter results

[5] Google DeepMind: Gemini Robotics 2 brings whole body intelligence to robots

[6] Meta Investor Relations: Meta Reports Second Quarter 2026 Results

[7] Microsoft Official Blog: The latest in our company transformation

[8] European Commission: Commission fines Google €890 million for breaches of the Digital Markets Act

[9] Euronews: Apple loses challenge over EU app store rules

[10] The National: Alphabet increases spending outlook as it races to build AI data centres

[11] Axios: Meta and Microsoft report ballooning AI expenses

[12] AP News: Amazon to boost spending on AI and other technology by $20 billion after strong Q2 results