Key Points
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Alphabet has multiple AI growth engines in Search, Cloud, TPUs, Gemini, and Waymo.
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Microsoft is already monetizing AI technologies at scale in its current products.
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Both companies are fully capable of converting AI spending into durable growth.
Alphabet (NASDAQ: GOOG, GOOGL) reported a 19% year-over-year growth in Google Search and advertising revenue, reaching $60.4 billion in Q1 of fiscal 2026, with an all-time high in search queries. Google Cloud also saw significant growth, with revenue jumping 63% year-over-year to $20 billion, and a backlog of $462 billion expected to translate to revenue in the next two years. Additionally, Alphabet’s Waymo is now conducting over 500,000 fully autonomous rides weekly.
Microsoft (NASDAQ: MSFT) achieved a 123% increase in AI-related annual revenue to $37 billion in Q3 of fiscal 2026. Overall, Microsoft Cloud revenue reached $54.5 billion, with Azure growing 40% year-over-year. The remaining performance obligation (RPO) surged 99% year-over-year to $627 billion, reflecting strong revenue projections. The company’s AI product, Microsoft 365 Copilot, has seen its paid seats grow 250% year-over-year, indicating robust adoption and engagement.
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