Investors were watching closely when Amazon (AMZN 5.55%) released its latest financial report after the market close on Wednesday. As one of the "Big Three" cloud providers and a force in artificial intelligence (AI), the company is among several bellwethers of what's happening in the space. Furthermore, what's happening at one company can offer additional insight into a competitor's results, providing greater context.
Amazon's results sent the stock reeling but provided an unexpected tailwind for Alphabet (GOOGL 2.53%) (GOOG 2.48%). Here's why.
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Strong cloud and AI demand
While Amazon's results were largely ahead of expectations, investors saw cause for concern. In the fourth quarter, net sales of $213.4 billion climbed 14% year over year, or 12% in constant currency. This resulted in diluted earnings per share (EPS) of $1.95, which rose 4%. To give those numbers context, analysts' consensus estimates were $211.6 billion in revenue and $1.96 in EPS, so the results were mixed.
Amazon Web Services (AWS), the company's closely watched cloud segment, performed better than expected. AWS revenue of $35.6 billion jumped 24% year over year, its fastest pace of growth in more than three years, and its third successive quarter of accelerating growth.
NASDAQ: AMZN
Key Data Points
CEO Andy Jassy said AWS remains supply constrained, as demand for AI and cloud services continues to outstrip supply. Customers are running large AI workloads on AWS, while also increasing their core cloud use. "We're monetizing capacity as fast as we can install it," he noted.
To correct the imbalance, Amazon plans to spend $200 billion on capital expenditures (capex) in 2026, with the vast majority of that going toward AWS. That's an increase of nearly 53% compared to 2025 and well ahead of Wall Street's expectations of $147 billion.
What does this have to do with Alphabet?
Since competition among the Big Three cloud providers is fierce, investors keep a close eye on their growth rates to gain insight into emerging trends. In the calendar fourth quarter, Alphabet's Google Cloud grew 48% year over year, fueled by surging demand for its Gemini AI. This growth far outpaced that of Microsoft Azure and AWS, which grew 39% and 24%, respectively.
NASDAQ: GOOGL
Key Data Points
Jassy sought to downplay the disparity. "It's very different having 24% year-over-year growth on a $142 billion annualized run rate than to have a higher percentage growth on a meaningfully smaller base, which is the case with our competitors.
Amazon pioneered the cloud computing space and has long led the race for cloud supremacy. The dawn of AI shifted the dynamics for cloud infrastructure providers, as demand for AI capabilities reaccelerated cloud adoption. Moreover, customers are rewarding companies that provide the most useful and broadest array of AI services. Right now, it appears Google Cloud is winning that race.
AWS's cloud market share currently sits at 28%, according to Synergy Research Group, while Azure and Google Cloud control 21% and 14%, respectively, which goes to Jassy's point that Google Cloud is growing from a smaller base.
That said, Google is closing the gap as users flock to its cloud and AI offerings, which is fantastic news for shareholders. And at less than 30 times earnings, Alphabet stock represents an intriguing opportunity, particularly given its impressive results.
