Investors are placing a clearer bet on Alphabet over Meta in the artificial intelligence race, favouring companies that can directly monetise heavy spending through established cloud infrastructure, while remaining cautious of models where returns depend more indirectly on advertising gains and future product bets.
American investors are showing greater confidence in Alphabet than Meta, despite both companies reporting strong earnings and ramping up spending on artificial intelligence.
The two tech groups beat revenue expectations and posted their fastest growth in years, while also raising capital expenditure forecasts as they invest heavily in AI infrastructure.
But market reaction diverged sharply. Alphabet shares rose about 7% in extended trading, while Meta’s stock fell by a similar margin.
The contrast reflects investor sentiment around how each company is positioned to monetise AI. Alphabet, alongside cloud rivals Microsoft and Amazon, operates large cloud businesses that can translate AI investment into revenue. Meta lacks a comparable cloud platform, making returns on its AI spending less direct.
Alphabet raised its capital expenditure guidance for 2026 to between $180 billion and $190 billion, up from an earlier estimate of $175 billion to $185 billion. Chief Financial Officer Anat Ashkenazi said spending in 2027 is expected to “significantly increase”.
The higher spending outlook came alongside revenue growth of 20%, the fastest quarterly pace since 2022. Cloud revenue rose 63%, and the company said its backlog reached $460 billion, driven by demand for AI infrastructure.
“Google is outperforming its peers which is well reflected in the current valuation,” analysts at D.A. Davidson wrote in a note after the results, maintaining a neutral rating.
Meta also increased its capital expenditure forecast, raising its range for the year to between $125 billion and $145 billion from $115 billion to $135 billion. The company said the revision “reflects our expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity.”
Chief Executive Mark Zuckerberg defended the spending, arguing it would drive long-term growth and strengthen the company’s advertising business.
“The trend over the last few years seems clear, that we are seeing an increasing return on the amount that we can improve engagement for people and value for advertisers,” Zuckerberg said. “This encourages us to continue investing heavily in what we expect will provide increasing value over the coming years as well.”
Meta reported revenue growth of 33% from a year earlier, its fastest expansion since 2021.
Zuckerberg said the company is “very focused on increasing the efficiency of our investments,” adding that Meta is developing custom chips with Broadcom and investing in processors from AMD and Nvidia.
Chief Financial Officer Susan Li said the company needed to maintain high levels of spending to support its AI ambitions.
“Meet our infrastructure needs and ensure we maximize our strategic flexibility over the coming years.”
She added that Meta’s “multi-year cloud deals and our infrastructure purchase agreements” contributed to a $107 billion increase in contractual commitments during the quarter.
Still, investors are watching for clearer returns on Meta’s AI investments, after the company spent much of the past year overhauling its strategy and investing heavily in talent and infrastructure.
At Alphabet, Chief Executive Sundar Pichai pointed to strong demand for the company’s AI capabilities.
“There’s tremendous demand for both AI solutions as well as AI infrastructure, including massive interest in our GPU offerings, as well as TPUs,” he said.
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