Will Amazon or Alphabet Better Digest AI Capex This Quarter?

Amazon and Alphabet both reported record cloud growth in Q2 FY2026 amid unprecedented capital expenditures to fuel their AI expansions. However, their balance sheets and funding approaches show divergent paths. Amazon's AWS revenue increased 36.7% year-over-year to $42.2 billion, delivering an operating income of $16.6 billion on an expanded 39% margin. Backed by $45.39 billion in quarterly operating cash flow and a custom silicon business exceeding $25 billion in annualized run-rate revenue, Amazon is effectively self-funding its $53.1 billion quarterly capital expenditures. In contrast, Alphabet's Google Cloud grew 82% to $24.8 billion with a $514 billion backlog, but the company raised full-year capex guidance to between $195 billion and $205 billion. To finance this buildout, Alphabet raised roughly $70 billion via debt and equity, suspended share buybacks, and saw long-term debt surge to $98.2 billion while facing margin pressure from third-party capacity reliance. Consequently, Amazon is positioned as better equipped to absorb the current AI investment cycle while preserving free cash flow stability.