Chapter 1: What is the main topic discussed in this episode?
Big tech earnings are back. You're listening to Motley Fool Money. Welcome, Fools. I'm your host, Rick Menards. And with me is Samit Deo, fellow Fool, fellow analyst. Thanks for being here. We're back with more earnings previews. Samit, how are you doing this fine Monday that I know you're in the Northeast? There was a lot of snow there. How are you shoveling your way through this?
Yeah, it's staying warm and getting through it. But I'm excited to be here and talking about tech earnings.
Yes, nothing heats up snow and makes it melt faster than tech earnings. And that's what we're going to tackle today. So in a minute, we're going to go over what to expect. There's a lot of big earnings report coming out this week in the tech world. Apple, Meta, Microsoft, they all report earnings later this week. We're going to take a look at that.
But first, let's start with a little bit of big macro from a tech perspective. Big tech companies like Alphabet, Amazon, Meta, Apple, and Microsoft are substantially increasing their capital expenditures in 2024 and 2025, with further growth expected in 2026, primarily driven by investments in AI infrastructure. Apple, while also increasing spending, maintains a more modest hybrid cloud strategy.
Here's some data, basically from projections on what they spent last year in 2025 versus 2024. Alphabet, 75% increase in AI-related spending. Amazon, 50%. Meta, 90%. Microsoft, 69%. which seems to be bringing a BB gun to an arms race, up 35%. And they're all expected to grow. They were spending in 2026, and understandably so. So let's talk about this, Samit.
What do you think are your expectations? Are these companies going to be spending more or less, these five big hyperscalers? And you may call Apple a hyper-failure if you want. I don't mind. Do you expect growth rates to continue, A, growing, and B, at the kind of speed that we're seeing it grow?
Yeah. I mean, I think it's all gas, no brakes for AI spending here because Apple is trying to keep up. So they just signed with Google to use Gemini in their series. So I can't imagine that's going to be cheap. I can't imagine it's going to involve further investment in their part to ramp up their AI.
And Meta just continues to astound us with the numbers they report every quarter when it comes to their CapEx spending. And Zuckerberg is not holding back. He is not afraid to spend.
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Chapter 2: What are the key earnings expectations for Apple, Meta, and Microsoft?
And so at least with those two, I think there'll be quite a bit of spending. Alphabet, they're in the lead. They'll continue to spend, I think. So I think that we're going to see accelerated spending in CapEx related to AI as we roll out earnings here. Yeah, and I agree.
I think even though we're saying, well, hey, scalability, it should get lower. AI should get cheaper. We're not seeing that. And I think at this point where you have to keep up with the Joneses, especially if you're in the Mag 7 and you want to keep up in this race.
Chapter 3: How are big tech companies planning to increase capital expenditures in 2026?
And I think Apple will eventually do it. I think Apple right now is almost like Nintendo in the console war that they almost feel like hey, we have a great brand, you know you're gonna buy us, our kids love it, and we have IP, we're very easy to use.
They've never been about the spec wars, but I think this is probably the year, especially now with having success with the iPhone 17, off to a strong start, they're gonna finally come through with what they've been promising for about two years now, and that's make it AI-centric. But Hamid, I have another question here.
And then basically we're talking about these five big tech companies are spending a lot of money on CapEx. Do you think that this will continue to be a big tech game or is there a market for other companies to come in? At least in just to spend more, like as far as percentage of spending on AI, how do you think this is gonna go?
I mean, I think this is going to be across the board with not just big tech companies. I think we're going to see a lot of companies continue to spend more in AI. AI, you have to think of it as a backbone for your company and your technology that runs your company. If you don't spend it, utilize it, your company might fall behind in their industry and with competitors.
You know, something like a Duolingo I could imagine is gonna spend more money on AI. Something, you know, like a Toast would probably spend more on AI. So lots of other non-big tech companies are using AI in all aspects of their business, not just their core businesses. So I definitely see this increasing across the board.
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Wake up, it's earnings season. So earnings season picked up a couple of weeks ago, actually about a week and a half ago. And while it was just the financial companies that first reported, now we're getting to the meat of the matter, the market moving companies. Some of the most valuable tech companies in the planet are reporting this week. We have Apple, we have Meta, we have Microsoft.
Sam Mead, let's start with Apple here. They're reporting their fiscal first quarter reports. And again, the iPhone 17 came out in September, mid-September in most of the country, then the final week of September in another 22 different countries. But clearly, that fiscal fourth quarter wasn't the quarter. This is the quarter, the first full three months of Apple 17.
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