Cloud giants raise capex forecasts to $595B as AI demand outstrips capacity

Global spending on cloud infrastructure services reached $143.4 billion in the second quarter of 2026, a 43% year-over-year increase that marks the fastest growth rate in eight years, according to data from Synergy Research Group published last week. The market has doubled in size over the past 11 quarters, with generative AI identified as the primary driver of accelerating demand.telecompaper+2

Hyperscalers Dominate as Capex Soars

Amazon Amazon.com, Inc. ↘ 2.32% Web Services retained its position as the largest cloud provider with a 28% market share, followed by Microsoft ↘ 0.73% at 20% and Google Alphabet Inc. ↗ 0.77% at 15%. Together, the three companies control roughly 67% of the public cloud sector.petri+1

Their latest quarterly earnings underscored the scale of investment required to maintain that dominance. AWS reported $42.2 billion in quarterly revenue, a 36.7% year-over-year increase and its fifth consecutive quarter of accelerating growth. Google Cloud posted revenue of $24.8 billion, up 82% year over year. Microsoft's commercial cloud revenue reached $59.3 billion for the quarter ended June 30, with Azure growing 43%.theregister+2

On capital expenditure, Amazon raised its 2026 forecast to approximately $220 billion, up from a prior estimate of $200 billion, citing higher memory costs and persistent demand that CEO Andy Jassy said will outstrip capacity through 2027. Alphabet increased its full-year guidance to between $195 billion and $205 billion. Microsoft put its expected calendar 2026 capex at approximately $175 billion. On paper, the three companies' forecasts add up to roughly $595 billion, though the figures reflect differing accounting treatments and business scopes.theregister

AI Reshapes the Revenue Mix

Public cloud services, including infrastructure-as-a-service and platform-as-a-service, grew even faster than the overall market at 47% year over year. AI-specific cloud services grew 165% year over year, according to market data. The United States remained the largest national cloud market, growing 49% and outpacing the global average, while India, Indonesia, Thailand, and Malaysia were among the fastest-growing markets.bingx+1

The surge has also given rise to a class of AI-focused providers that Synergy Research calls "neoclouds," including CoreWeave, Oracle ↘ 0.75%, and others that are capturing demand for specialized AI computing infrastructure.petri

Supply Constraints Persist

Despite the spending surge, cloud executives say capacity still falls short. Google CFO Anat Ashkenazi told analysts the company is "working in a supply-constrained environment" where demand continues to outpace investment. AWS head Matt Garman confirmed the company is signing five-year commitment contracts with customers as it races to build out infrastructure. The shortage of GPUs, memory, and related components is also pushing enterprises that might otherwise build their own infrastructure toward cloud providers, a dynamic Jassy described as "a further impetus pushing companies who have on-premises infrastructure into the cloud".odaily+1