Weekly Research Briefing: Into the Clouds

Microsoft – “For calendar year 2026, we expect to invest roughly $190 billion in capital expenditures [vs. $153.7bn consensus], which includes approximately $25 billion from the impact of higher component pricing. We remain confident in the return on these investments given higher demand signals and increasing product usage as well as the efficiencies we're already driving across the platform.”

Meta – “We anticipate 2026 capital expenditures, including principal payments on finance leases, to be in the range of $125 billion to $145 billion, increased from our prior range of $115 billion to $135 billion. This reflects our expectations for higher component pricing this year and to a lesser extent, additional data center costs to support future year capacity.”

Amazon – “As we've been sharing, the faster AWS grows, the more short-term CapEx we’ll spend... The free cash flow in ROIC for these investments are cumulatively quite attractive a couple of years after being in service. However, in times of very high growth, like now, where the CapEx growth meaningfully outpaces the revenue growth, the early years, free cash flow is challenged until these initial tranches of capacity are being monetized and revenue growth outpaces CapEx growth.”

Google – “We are updating our full year 2026 CapEx guidance range to $180 billion to $190 billion, up from our previous estimate of $175 billion to 185 billion, to now include investment related to the acquisition of Intersect, which closed in March. We are seeing unprecedented internal and external demand for AI compute resources. The investments we are making in AI is delivering strong growth, as evidenced by the record revenue and backlog growth in Google Cloud and strong performance in Google services. Looking ahead, these strong results reinforce our conviction to invest the capital required to continue to capture the AI opportunity, and as a result, we expect our 2027 CapEx to significantly increase, compared to 2026.”

In 2026, Morgan Stanley estimates that US hyperscalers will spend over $800bn on capex. To put that in perspective, it roughly matches what all the non-technology companies in the S&P 500 spent in 2025, combined.

This spending is also growing rapidly, outright and relative to expectations. That ~$800bn in hyperscaler capex we forecast for 2026? It's almost double the figure spent in 2025 and triple the figure from 2024. Next year, my colleagues estimate that US hyperscaler capital spending could hit $1.1 trillion.

True, part of this increase comes from higher prices for the components of AI. But a bigger part of it is simply ‘more’: more demand, more chips, and more power.

“At our companies — and by the way, we have 270 companies, 13,000 pieces of real estate, it’s massive in its scale — their LLM spend was up 15-fold in Q1 this year over last. Now, off a small base, yeah, but it tells you what’s happening. All these companies trying to find ways to be more efficient.” - Blackstone President Jon Gray

@knowledge_vital: $CARR "Orders in our global Commercial HVAC business increased 35%, helped by data centers which were up over 500% in the quarter"

@knowledge_vital: $WCC "Data center sales of $1.4 billion were up approximately 70% and now represent 24% of our total Wesco sales"

@TheTranscript_: EQT AB: "We see global demand for AI compute and hence data centers and power consumption only accelerating. Industry estimates suggest that $4 trillion will be invested into data centers and energy Infrastructure to meet this demand over the next five years."

• The demand drivers again, I'm not going to underplay this. I've been in this business a long time. I've been in our Longs product businesses or Sheet Group. And from a Longs perspective, our customers that I'm talking to today are busier than anything they've ever seen in their history. So when I tell you that demand driver -- drivers today are, it's like '21, '22, or even beyond in some cases, depending on the product group. So it is an incredible market.
• Their backlogs are at historic levels. Their customers' customers are busier than anything that I've seen in, again, my 30-year career. So, where is that going? Man, it's obviously the non-res, data centers, energy, structural side and infrastructure around energy, chips, chip plants and facilities, warehousing, and in an area that we're going to continue to see expanded into the military complex in the years to come for Nucor. So I would tell you it's hitting on all cylinders. And while data centers are white hot, everyone's looking to participate. If you pulled out all of the data center backlog from Nucor, I mean, it only takes that down about 10% (Leon J. Topalian, Chair and Chief Executive Officer, 1Q26 Call)

“I can tell you we are hiring just as many software developers as we ever had inside of Amazon. And in fact, I see the demand for that really accelerating...Amazon is hiring 11,000 new SDE interns and full-time employees this year. That is not jobs going away” - Amazon AWS CEO Matt Garman

“...the economy has been resilient. It really has, not just this time, but it’s been remarkably resilient for some years now. The U.S. economy has just powered through shock after shock, and consumers are still spending. And that’s what the banks will tell you, credit card companies will tell you, the retail sales numbers that we got most recently. People are still spending.” - Federal Reserve Chair Jerome Powell

@WalterDeemer: Ten-year yield chart. Something to keep an eye on.

@GasBuddyGuy: tremendous jumps in average gas prices, these are the top 10 states seeing average prices surge the most, all of them over 30c/gal higher from a week ago.

@GasBuddyGuy: BREAKING: #Wisconsin has set a new all-time record for average diesel price at $5.620/gal, beating out 2022's record. Wisconsin joins Illinois and Michigan with a new diesel record.

With 63% of S&P 500 companies having reported earnings, backward-looking Q1 2026 results have been exceptionally strong. While the aggregate S&P 500 EPS growth rate of 25% is distorted by idiosyncratic one-time benefits, earnings growth is tracking at a 16% pace excluding those items, and companies have reported the lowest frequency of EPS misses in 25 years outside of the COVID reopening period.

Backward-looking results have been strong. 61% of S&P 500 companies have beaten consensus EPS expectations by more than a standard deviation of estimates, above the historical average of 49%. So far, only 5% of companies have missed earnings estimates, the smallest share in over 25 years of data history outside of the 2021 COVID reopening period. Revenue surprises have been similarly positive.

"Everything we're seeing on the ground is that the institutional investor is not anxious.” (Ares Management)

"We view the near-term industry headwinds in credit retail vehicles as cyclical rather than structural and continue to see strong demand across the industry in private equity, infrastructure, and secondaries." (TPG Inc.)

“We are seeing a reset underway with wider spreads, lower leverage levels and more attractive overall deal terms across the market. New transactions today are being discussed at 50 to 75 basis points of enhanced levels of fees and spread alongside a half to full turn of lower leverage and tighter documentation versus the second half of last year.” - Ares Capital CEO Kort Schnabel

KONE Oyj confirms to acquire German rival TK Elevator for €5B cash plus €15.2B shares, €700M synergies by year 3, close Q2 2027

- Consideration: €5B cash, up to 270M new class B shares valued at €15.2B (April 28 close).
- Implies €29.4B enterprise value including net debt.
- Combined: €20.5B revenue, 65% from service and modernization.

• Hubbell Inc (HUBB) to acquire NSI Industries for $3.0B cash. Expect to be accretive in 2026. $3.0 billion transaction to be financed with cash on hand and debt. Purchase price represents ~15.5x anticipated 2026 EBITDA.
• Definitive agreement to acquire NSI Industries, a portfolio company of Sentinel Capital Partners and a leading provider of electrical fittings, connectors, components and wire management products, for $3.0 billion in cash, subject to customary adjustments.
• “We are excited to add a high growth business in NSI to Hubbell’s Electrical Solutions portfolio,” said Gerben Bakker, Chairman, President and CEO. “As electrification megatrends drive attractive growth across the electrical industry over the next several years, NSI offers highly complementary products and industry-leading brands to our HES portfolio across strategic growth verticals including light industrial, datacenter and network infrastructure applications. The acquisition of NSI fits clearly with our long-term strategy to grow our offering of critical infrastructure solutions to our core electrical and utility customers.”

A startup backed by General Catalyst Partners agreed to acquire Global Business Travel Group Inc., the travel platform spun out of American Express Co., in a deal worth about $6.3 billion.

Long Lake Management agreed to pay $9.50 per share in cash for the Amex-backed business-travel company, according to a statement Monday, confirming a Bloomberg News report. That represents a 60% premium to its closing price on Friday…

New York-based Amex GBT had been exploring a potential sale and working with advisers, Bloomberg News reported in November. American Express is still the company’s largest shareholder, owning a stake of about 30%, according to data compiled by Bloomberg…

Amex GBT competes in the lucrative but fragmented business-travel market against competitors such as Booking Holdings Inc., BCD Travel and Navan Inc…

Ken Chenault, chief executive officer at American Express from 2001 to 2018, is now the chairman and managing director at General Catalyst.

“We first built this network over 20 years for ourselves. We then made it available to Amazon sellers,” said Peter Larsen, vice president of Amazon Supply Chain Services. “Now we’re making it available to any business of any shape or size.”

The nation’s largest company by revenue on Monday is announcing the launch of Amazon Supply Chain Services, a centralized place for companies from consumer-goods manufacturers to apparel retailers to hire Amazon for services such as fulfillment, ocean and air shipping, and truck transportation.

The move to tie together all of its supply-chain services in one place in effect officially makes Amazon a third-party logistics provider, or 3PL, competing with the likes of transportation and warehousing giants such as DSV, DHL Group and Kuehne + Nagel International. It positions Amazon to take a bigger bite out of a global market for third-party logistics services that is estimated at more than $1.3 trillion, according to research group Armstrong & Associates.

“We think it’s a very large opportunity,” Larsen said.

Amazon over nearly three decades has assembled a supply chain spanning the globe with warehouses, planes, trucks and delivery vehicles. Its last-mile delivery service has grown to become the nation’s largest parcel carrier by volume, ahead of United Parcel Service, FedEx and the U.S. Postal Service, according to parcel-analytics firm ShipMatrix. The company has built its own logistics technology to forecast demand, plan inventory and route freight.