The Enormous Earnings Power of the Mag 7 Companies

Alphabet GOOGL shares were already star performers before the company’s Q1 earnings release on Wednesday, making some of us anxious that the stock might be priced for perfection. But they literally hit it out of the park, with impressive momentum not just in the cloud business but also search, subscriptions, and backlog.

With Alphabet management more than answering the AI monetization question through these record results, the market didn’t lose a beat over further increases in capital expenditures. The company expects to spend in the $180 billion to $190 billion range now, up from the previous guided range of $175 billion to $185 billion.

Amazon’s Q1 results weren’t Alphabet-good, but they were nevertheless very strong, with cloud revenues showing clear acceleration and growing at their fastest pace since 2022 at +28%. The growth pace is expected to pick up further in Q2 and beyond, given new deals with Meta META, Anthropic, and OpenAI.

Amazon’s 2026 Q1 cloud revenue growth of +28% follows growth rates of +24% and +20% in 2025 Q4 and Q3, respectively. Alphabet’s cloud revenue growth was in a league of its own, up +63%, which follows growth rates of +48% in 2025 Q4 and an estimated +35% to +40% in 2025 Q3. Unlike Alphabet and Amazon, Microsoft MSFT disappointed once again, coming up short in its results and commentary for the third quarter in a row.

The only reason why someone would find fault with Microsoft’s +29% cloud revenue growth is that the company’s growth pace in each of the preceding two quarters was in a comparable range. Microsoft has long noted capacity issues weighing on its cloud growth, which seems plausible since Alphabet also noted this issue.

Microsoft shares have been true laggards in the Mag 7 group, down -14.5% this year vs. Alphabet’s +23.1% rise and the S&P 500 index’s +6.2% gain. The company has been swept up in the software turmoil, so the issue isn’t the stalled cloud unit. Microsoft had also banked heavily on OpenAI for its LLM, and that relationship has unraveled ‘bigly’. It is reasonable to expect that they will eventually get there, after all, they have the resources and people, but it will likely take them a while.

At this stage in the Q1 reporting cycle, Nvidia NVDA is the only Mag 7 member that has yet to report March-quarter results. Nvidia is scheduled to report Q1 results on May 20^th, with EPS and revenues for the period expected to be up +118.5% and +78.7% from the same period last year, respectively.

Combining the actual results for the 6 Magnificent 7 members that have reported already with estimates for Nvidia, total Q1 earnings for the group are expected to be up +45.7% from the same period last year on +24.6% higher revenues, which would follow the group’s +26.1% earnings growth on +19.4% revenue growth in 2025 Q4.

The chart below shows the group’s blended Q1 earnings and revenue growth relative to the preceding period and the expected growth over the next three periods.