Key Takeaways

■  AWS revenue grew 37% year-over-year to $42.2B — the fastest pace in 18 quarters and well ahead of the ~31% Street consensus — with segment operating margin hitting a record 39.4%.

■  Consolidated operating income of $27.5B (+43% Y/Y) grew more than twice as fast as revenue, evidencing genuine operating leverage rather than a top-line-only beat.

■  Management raised FY2026 cash capex guidance to ~$220B from ~$200B on higher memory costs and AI demand, and the balance sheet has flipped from ~$58B of net cash to roughly $6B of net debt as the build-out increasingly draws on the debt markets.

■  Shares are already up 15.3% since the print, well beyond what our updated estimates justify; we raise our estimated fair value to $260 (from $230), which remains below the current quote.

Amazon, Microsoft, and Alphabet took combined annual capital expenditures from roughly $120 billion to roughly $500 billion in four years. A ROIC/WACC/EVA read on AWS, Azure, and Google Cloud finds all three still clear their cost of capital — but the spread that made them extraordinary compounders has narrowed sharply at Microsoft and Alphabet, and all three now converge toward a similar, materially lower level of return on new capital.

This chart file is a companion to "Is the AI Capex Supercycle Earning Its Cost of Capital? A ROIC/WACC/EVA Analysis of Amazon, Microsoft, and Alphabet" published at gregg-carlson.com. The companion report contains complete methodology, ROIC framework, segment-test limitations, scenario analysis, and full disclosures. All figures have been cross-verified against the three author financial models and named public sources cited per chart.

Amazon, Microsoft, and Google are each spending $80B–$200B on AI infrastructure in FY 2026 — a combined commitment approaching $600 billion. But the strategies are fundamentally different: Amazon is building vertically (custom chips + cloud), Microsoft is monetizing through distribution (Azure + Copilot + OpenAI), and Google is leveraging its model advantage (Gemini + Search + Cloud). The capital allocation choices each company makes today will determine their competitive positions for the next decade.

Amazon’s Q1 2026 earnings beat across every major line: $181.5B revenue (+17% YoY), $23.9B operating income at a record 13.1% margin, AWS growing 28% to $37.6B (fastest pace in 15 quarters), and Advertising at $17.2B (+24% YoY) crossing $70B in TTM revenue.

Amazon is not one business — it is seven with radically different economics. AWS and Advertising, which represent approximately 31% of revenue, generate the overwhelming majority of economic value. Valuing Amazon without separating these segments produces a meaningless blended average.

Andy Jassy's 2025 letter is not primarily a shareholder communication. It is a capital allocation philosophy, a competitive strategy memo, and a treatise on long-duration thinking — all wrapped in annual report format. The lessons it contains apply to any business at any scale.

The five largest hyperscalers are projected to spend $660–$700 billion on capex in 2026 — the largest infrastructure investment cycle in technology history. What it means for your portfolio and your business.