Three Hyperscalers, One Quarter: MSFT vs AMZN vs GOOGL

AI Infrastructure Dissection Series · Comparative Briefing

ALPHABET INC. · MICROSOFT CORPORATION · AMAZON.COM, INC.

Three Clouds, One Quarter: Comparing Google Cloud, Azure, and AWS on Equal Footing

 

Sources: Alphabet Inc. Form 10-Q, Q1 and Q2 2026; Microsoft Corporation Form 10-Q, Q3 FY2026, and Form 10-K, FY2026; Amazon.com, Inc. Form 10-Q, Q1 and Q2 2026. All filed with the U.S. Securities and Exchange Commission · 2026

Executive Summary

Three companies, three cloud businesses, one earnings season. Alphabet, Microsoft, and Amazon all filed results covering the same April–to–June quarter this year, but Microsoft reports its cloud segment on an annual basis, not quarterly. Lining the three up on the same quarter required working backward from Microsoft's annual filing and its nine-month filing to isolate that one quarter by subtraction. Once that's done, a different picture shows up than the one in any single earnings release.

 

Google Cloud is growing fastest by a wide margin — revenue nearly doubled year over year — but it's still the smallest of the three clouds in dollar terms, and its operating margin, while expanding quickly, remains the lowest of the group. Amazon Web Services is the largest cloud business by revenue and grew a healthy 37%, with both growth and margin improving from a year ago. Azure, once isolated to a directly comparable quarter, turns out to have the slowest growth of the three and a margin that barely moved — a result the headline numbers obscure, since Microsoft's own reporting never shows this quarter in isolation.

 

The capital spending picture cuts against the growth picture. Alphabet and Amazon both spent more on data centers and equipment than their businesses generated in cash this quarter, pushing free cash flow negative for both — a reversal from a year earlier. Microsoft spent aggressively too, but stayed cash-flow positive. None of the three companies disclose how much of that spending goes specifically to their cloud segment versus everything else they do, so it isn't possible to say which cloud business is actually the most capital-hungry per dollar of revenue — only how much each company is spending in total.

 

Headline profit figures for two of the three companies are also doing more work than they should. Alphabet's reported net income for the first half of the year nearly tripled, and Amazon's roughly quadrupled for the quarter — but strip out unrealized gains on investment stakes (a private-company holding for Alphabet, stakes in Anthropic and OpenAI for Amazon) and both companies' underlying profit actually fell. Microsoft carries a similar adjustment on a much smaller scale, and its adjusted profit still grew. None of this settles which company's cloud strategy is ahead. It shows where growth is fastest, where margins are widest, who's paying for it in cash today, and how much of each company's reported profit is coming from running servers versus from the value of stock they happen to hold.

Key Metrics

FASTEST CLOUD GROWTH

+81.8%

Google Cloud, YoY, Q2 2026

LARGEST CLOUD BY REVENUE

$42.2B

AWS, Q2 2026

HIGHEST CLOUD MARGIN

40.6%

Azure, derived Q4 FY2026

ONLY ONE CASH-FLOW POSITIVE

+$19.6B

Microsoft, free cash flow, same quarter

STEEPEST EARNINGS-QUALITY GAP

+245% vs −45%

Amazon, GAAP vs. adjusted net income

AWS ASSET GROWTH, ACCELERATING

+19.1%

quarter over quarter, Q2 2026

Source: Alphabet Inc., Microsoft Corporation, and Amazon.com, Inc. Form 10-Q and Form 10-K filings, 2026. Free cash flow and adjusted net income figures are estimates derived from reported line items, not company-published metrics.

Google's and Amazon's cloud numbers come straight from their quarterly filings: revenue and operating income for April through June 2026, reported as a standalone quarter. Microsoft doesn't report Azure this way. Its 10-K gives a full fiscal year (July 2025 through June 2026), and its most recent 10-Q gives the first nine months of that year. The only way to see Microsoft's April–June quarter on its own is to subtract one from the other — full year minus nine months. That arithmetic is shown below, and it happens to land Microsoft's fiscal fourth quarter on exactly the same calendar months as Google's and Amazon's second quarter.

 

TERM: OPERATING MARGIN

The share of a segment's revenue left over after subtracting the direct costs of running it — cost of goods sold and operating expenses — but before interest, taxes, and one-off items. A higher operating margin means more of every revenue dollar turns into profit at the segment level.

Cloud Segment Revenue and Operating Margin, April–June 2026

Source: Alphabet Inc. Form 10-Q, Q2 2026; Amazon.com, Inc. Form 10-Q, Q2 2026; Microsoft Corporation, derived from Form 10-K FY2026 minus Form 10-Q Q3 FY2026.

Metric	Google Cloud	Azure (derived)	AWS
Revenue	$24.8B	$39.3B	$42.2B
Revenue growth, year over year	+81.8%	+31.6%	+36.8%
Operating margin	35.6%	40.6%	39.4%
Margin change, year over year	+14.9 pt	flat	+6.5 pt

Azure comes out as the largest of the three by operating income and holds the widest margin, but it's also the only one of the three where margin didn't move — essentially flat year over year, while both Google Cloud and AWS expanded margin meaningfully. Its revenue growth rate, once isolated to the correct quarter, is the slowest of the three, not the fastest or the middle. Google Cloud's 81.8% growth is the standout number in the table, but it's growth from a smaller base than either of the other two, and its margin, despite expanding by nearly fifteen points, is still the lowest of the group.

TERM: FREE CASH FLOW

Cash generated from a company's operations, minus what it spends on property and equipment. Negative free cash flow means a company is spending more building its business than that business currently brings in — the gap has to be covered by cash on hand, new debt, or new financing.

All three companies are spending heavily on data centers and servers this quarter. Not all three are covering that spending out of what their businesses actually bring in. In the same April–June quarter, Microsoft's operating cash flow of $55.4 billion comfortably covered its $35.8 billion in capital spending. Alphabet's $39.1 billion in operating cash flow did not cover its $44.9 billion in capital spending. Amazon's $45.4 billion did not cover its $54.2 billion either.

 

Free Cash Flow, April–June 2026 (Estimated)

Estimated: operating cash flow minus capital expenditure. Alphabet and Microsoft figures derived by subtraction from quarterly and annual filings; Amazon figure reported directly as a standalone quarter. Not a company-published measure for any of the three.

Metric	Alphabet	Microsoft	Amazon
Operating cash flow	$39.1B	$55.4B	$45.4B
Capital spending	$44.9B	$35.8B	$54.2B
Free cash flow	−$5.9B	+$19.6B	−$8.8B
Same quarter, one year earlier	+$5.3B	+$25.6B	roughly break-even

Alphabet and Amazon both moved from positive free cash flow a year ago to negative free cash flow this quarter. Microsoft's free cash flow fell too — down about 23% from a year earlier — but it started from a large enough base that it stayed comfortably positive. What none of the three filings can answer is how much of this capital spending is actually going into the cloud segment specifically, as opposed to everything else the company builds. All three report capital spending only at the whole-company level. A reader can see that Amazon spent $54.2 billion company-wide, but not how much of that went to AWS data centers versus fulfillment warehouses; the same limit applies to Alphabet's Google Cloud and Microsoft's Azure. That's not a gap in this analysis — it's a gap in what any of the three companies choose to disclose.

TERM: UNREALIZED GAIN

A gain that shows up in a company's reported profit because the value of something it owns — often stock in another company — went up. Nobody sold anything to collect real cash; it's an accounting estimate of what the stake is worth right now. If that value falls back next quarter, the gain shrinks or turns into a loss just as easily, with no sale required either way.

Alphabet's net income for the first half of 2026 came in at $174.8 billion, up nearly 179% from the same period a year ago. Read one line further into the filing and most of that increase traces to a single item: a $135.8 billion gain, mostly unrealized, tied to the rising value of a stake Alphabet holds in a private company. Strip that gain out and Alphabet's underlying net income for the half actually fell about 24% year over year, from roughly $51.3 billion to about $39.0 billion.

 

Amazon's version of the same story is sharper. Reported net income for the quarter was $62.6 billion, up nearly 245% year over year. Amazon's own filing attributes most of that to upward revaluations of its stakes in Anthropic and OpenAI — $10.0 billion invested in Anthropic preferred stock and $13.7 billion invested in OpenAI's Series C round in this quarter alone, on top of positions built up earlier. Adjusted for those non-operating gains, Amazon's net income for the quarter didn't grow at all — it fell by about 45%, from roughly $16.9 billion to about $9.3 billion.

 

Reported (GAAP) vs. Adjusted Net Income

Alphabet: six months ended June 30, 2026. Microsoft: fiscal year ended June 30, 2026. Amazon: three months ended June 30, 2026. Different periods for each company reflect what each filing reports; growth rates, not absolute dollar figures, are the comparable measure across the three. Adjusted figures are estimates derived by removing each company's own reported investment gain or loss line, not a company-published non-GAAP measure for Alphabet or Amazon.

Microsoft has the same kind of adjustment on its books — gains and losses tied mostly to its stake in OpenAI — but at a much smaller scale relative to the size of the company. Reported net income for the fiscal year was $133.7 billion, up about 31%. Removing the investment-gain effect brings that down to roughly $122.7 billion, still up about 15%. Microsoft's headline number is inflated by this effect, but not distorted by it in the way Alphabet's and Amazon's are: on an adjusted basis, all three of these are still real, profitable, growing businesses. The difference is how much of what got reported to shareholders this period actually came from running the business, versus from a stock position the company happens to hold.

Amazon is the only one of the three companies that reports how many assets sit inside its cloud segment specifically. Both Alphabet and Microsoft state plainly, in their own filings, that they don't allocate assets to individual segments at all. Alphabet's language: its operating segments "are not evaluated using asset information." Microsoft's language is more direct still: "it is impracticable for us to separately identify the amount of amortization and depreciation by segment." Neither statement is a disclosure gap this analysis failed to find — both companies are saying outright that the number doesn't exist in their own internal reporting the way Amazon's does.

 

TERM: SEGMENT ASSETS

The portion of a company's balance sheet — mainly property, equipment, and leases — that management assigns to a specific business unit for internal reporting. Not every company tracks this at the segment level; when they don't, a segment's profit and revenue can still be measured, but how much capital it's tying up cannot.

Because AWS assets are disclosed, and disclosed as of three different dates across two filings, its growth can be tracked directly rather than derived. AWS assets grew from $252.6 billion at the end of 2025 to $294.1 billion at the end of the first quarter, then to $350.2 billion at the end of the second — a pace that sped up rather than leveled off, from 16.4% quarterly growth to 19.1%. Over the two quarters combined, AWS's asset base grew 38.6%.

 

AWS Segment Assets, December 2025–June 2026

Source: Amazon.com, Inc. Form 10-Q, Q1 2026 and Q2 2026, Segment Information.

Set against operating income of $16.6 billion for the second quarter, that asset base implies a quarterly return on assets of roughly 5.2% — a figure worth reading as a rough scale indicator, not a precise annual return, since a single quarter multiplied by four assumes a steadiness in AWS's business that a fast-growing, fast-building segment may not actually have. The same caution applies to the growth rate itself: two quarters of accelerating asset growth is a real, filed data point, but it is not the same thing as a measured, sourced statement about the size or growth rate of the cloud computing market as a whole. Getting that number would require an outside source — a market research firm or a government statistical office — tracking cloud spending across every provider, not just three companies' own filings about themselves.

 

What competitive pressure looks like in the filings

All three companies' own risk disclosures describe a cloud infrastructure market where the competitors are increasingly each other. In May 2026, a company called Xockets filed a complaint with the U.S. International Trade Commission naming Amazon, Amazon Web Services, Nvidia, and Microsoft together, alleging that specific AI-server configurations sold by AWS — including hardware built around Nvidia's GB200 chips — infringe several of its patents. The commission opened an investigation the following month. Separately, Alphabet is still working through a €3.0 billion European Commission fine, issued in September 2025, over practices in its advertising technology business; Alphabet booked a $3.5 billion charge related to it and has appealed. Neither dispute is about cloud computing directly, but both illustrate the same point: at this scale, legal and regulatory friction is now a normal, recurring feature of the business, not an exceptional event.

 

What we still can't measure

Two limits are worth stating plainly rather than working around. First, segment-level capital spending for AWS, Azure, or Google Cloud individually does not exist in any of these companies' public filings — not this quarter, not any prior quarter, in a 10-Q or a 10-K. It is not a question of finding the right document; none of the three report it. Second, nothing in this dataset supports a claim about the overall size or growth rate of the cloud computing market. Three companies' segment revenue, however fast it's growing, is not the same as a market-share-weighted total, and treating it as one would be the kind of definitional mismatch that produces a misleading number rather than an informative one.

Source Credibility Assessment

Source	Type	Notes
Alphabet Inc., Form 10-Q, Q1 2026	SEC EDGAR direct filing	Company-published, SEC-filed; source for standalone Q1 cash flow figures
Alphabet Inc., Form 10-Q, Q2 2026	SEC EDGAR direct filing	Company-published, SEC-filed; primary source for Google Cloud segment and equity-gain data
Microsoft Corporation, Form 10-Q, Q3 FY2026	SEC EDGAR direct filing	Company-published, SEC-filed; nine-month segment and cash flow figures used to derive Q4 standalone by subtraction
Microsoft Corporation, Form 10-K, FY2026	SEC EDGAR direct filing	Company-published, SEC-filed, audited; full fiscal year figures used as the other half of the subtraction
Amazon.com, Inc., Form 10-Q, Q1 2026	SEC EDGAR direct filing	Company-published, SEC-filed; source for segment assets as of March 31, 2026
Amazon.com, Inc., Form 10-Q, Q2 2026	SEC EDGAR direct filing	Company-published, SEC-filed; primary source for AWS segment, cash flow, and segment assets data

All adjusted or derived figures in this briefing — free cash flow, adjusted net income, Microsoft's standalone fourth quarter, quarterly return on assets — are calculated from the sources above and are not company-published metrics unless stated otherwise. They are labeled as estimates throughout the text.

References

Alphabet Inc. 2026a. Form 10-Q for the Quarterly Period Ended March 31, 2026. Filed with the U.S. Securities and Exchange Commission, April 29, 2026.

 

Alphabet Inc. 2026b. Form 10-Q for the Quarterly Period Ended June 30, 2026. Filed with the U.S. Securities and Exchange Commission, 2026.

 

Amazon.com, Inc. 2026a. Form 10-Q for the Quarterly Period Ended March 31, 2026. Filed with the U.S. Securities and Exchange Commission, 2026.

 

Amazon.com, Inc. 2026b. Form 10-Q for the Quarterly Period Ended June 30, 2026. Filed with the U.S. Securities and Exchange Commission, 2026. Guidance figures furnished via Form 8-K, July 30, 2026.

 

Microsoft Corporation. 2026a. Form 10-Q for the Quarterly Period Ended March 31, 2026. Filed with the U.S. Securities and Exchange Commission, April 29, 2026.

 

Microsoft Corporation. 2026b. Form 10-K for the Fiscal Year Ended June 30, 2026. Filed with the U.S. Securities and Exchange Commission, 2026.