DIGI: Big Tech Capex Hits Critical Limit

Añadido: 2026-04-29

[00:00:00]What is the number one thing? Is it basically justifying the big CapEx that we're going to be looking out for today?

[00:00:05]That's one of the biggest questions we've gotten going into it, is, you know, are these companies going to raise their fiscal 26 CapEx guide?

[00:00:15]And the precedent from last year would would say yes, because last year, as the year is progressing, the CapEx kept rising in absolute dollar terms.

[00:00:25]But going into it, we actually kept our CapEx forecast for Alphabet, Amazon and Matt intact were right around where where they guide it.

[00:00:35]And the main reason is they gave themselves wiggle room when they set the CapEx guide at four at the four Q print. And what I mean by that is Amazon exited 2025 at about a little over $150 billion of CapEx.

[00:00:49]They set their CapEx guide at 200 billion for for fiscal 26.

[00:00:53]Alphabet gave themselves more room. They exited over 110 billion.

[00:00:57]They got it to 180 billion at the midpoint and it was a similar kind of story. They gave themselves 40, $50 billion of wiggle room, which are big dollars, and gives the companies an opportunity to have CapEx step up over the year. But but yeah, so we don't think they're going to raise some investors have said, oh, maybe, you know, kind of alphabet and or metta raises at the low end, but we're either at the midpoint or high end for all the guide. So but that is going to be, you know, a big one for tonight. And it's obviously a big night, as you alluded to, was yesterday instructive at all, John, for understanding how this market might react. Just a Wall Street Journal story about Sarah Frier and Openai questioning or discussing not being able to hit the internal targets and not being enough to cause a market sell off.

[00:01:44]Does it feel like we're just at a very fragile moment that not getting close or even just meeting expectations is just not enough?

[00:01:51]Yeah, it's a it's a good question. And I think tonight we're going to get some data points that are going to be impactful one way or the other for the stocks. And I would go to just talk about Amazon and Alphabet here, their cloud businesses.

[00:02:05]Another big topic will be what is the revenue growth rate?

[00:02:10]What is the revenue growth that Google Cloud and IWC investors are looking for high twenties, low 30% revenue growth versus 24% in four.

[00:02:19]Q And that growth is is being driven by their A.I.

[00:02:23]stack and their core business. And one thing one positive and CEO Jassy is shareholder letter from a couple of weeks ago he said oh you know AWB revenues are a $15 billion run rate which is, which is, you know, more than what we had modeled. So I thought that was instructive and helpful. But that's a key number tonight was top line growth. And then Google Cloud saw a massive acceleration of revenue growth in 4qi and investors are looking at grew 48% year over year. Investors are looking for mid-fifties to mid 60% growth. So another big step up I acceleration in Google cloud revenue growth and and that's been driven by their A.I.

[00:03:02]stack they're leading model Gemini their chips AI and the other thing that's interesting about Google Cloud that's instructive as well is last year they signed more $1 billion deals than the prior three years combined, which gives us a little insight into the demand for for their cloud business and also kind of governs what they're spending on CapEx because they're doubling CapEx this year. Hey, John, I got less than a minute here, but I just wonder how much you're going to hear from these companies about efficiencies. The news, for example, from better to cut 10% of its workforce, will that also be a defining feature?

[00:03:41]Yeah, we'll get a head count. You know, we'll get a head count.

[00:03:45]It's a little bit skewed because with the with the rising cutbacks, you have rising depreciation, which we're going to see.

[00:03:51]And and that's expected, I mean, to actually guides to a full year CapEx guide. So I think people are going to are looking to see are they going to. Are they going to cut that at the low end because of these headcount cuts? But yeah, and it'll be interesting to see what the margins look like.