1.      Beats across the board in Q2 - and confidence for Q3

Logic suggests “big” companies should slow as they mature due to the law of large numbers, while smaller disruptors outgrow them—yet the Mag-7 defy this. Already the world’s largest businesses, they not only keep growing, but Q2 growth rates accelerated, comfortably beating consensus estimates. Operating profit beats were broad-based too– Tesla being the lone exception.

Chart 1: Six of the Mag-7 stocks reported Sales and Operating Profits well ahead of investors’ expectations

3.      Reaping benefits from early AI adoption

A key reason the Mag-7 have accelerated revenue growth despite their huge scale is their early, large-scale investment in AI. Implementing AI is expensive; only companies with their balance sheet strength could commit the necessary billions of years ahead of competitors. They are now the first to benefit from the AI boom.

Four main ways the Mag-7 monetise AI:

• “Picks & shovels” – Nvidia produces the AI chips essential for training and running AI models. It still dominates this market by a wide margin, although competitors such as AMD, Broadcom and Marvell are targeting slices of the opportunity.
• Building / selling access to AI infrastructure – Microsoft, Google, and Amazon purchase AI chips to build vast data centres that provide the computing capacity for customers’ AI workloads. This is now a high-growth driver in cloud computing.
• AI-powered software and tools – beyond infrastructure, these firms are building and selling AI-enabled services, such as Microsoft’s Copilot or Meta’s Advantage+, as well as other in-house or third-party AI applications that increase customer productivity and lock in usage.
• Internal use of AI – the Mag-7 also deploy AI to improve efficiency, enhance decision-making, and accelerate product development in their own core businesses – effectively boosting margins and competitiveness.

Investors focus on the first three, more visible ways to monetise AI. In fact, Cloud revenue is probably the most closely watched metric. And indeed, cloud revenue growth has accelerated notably in Q2: Microsoft Azure rose 39% YoY, up 6 %-points from the prior quarter, Google Cloud +34% YoY, up 3 %-points, and Amazon Web Services acceleration was only a 60bps, to +17.5% YoY (though H2 comments were upbeat). All in all – the market got another proof point that AI monetisation is happening.

But the rest of the operations have surprised to the upside too, suggesting that the market might have underestimated how much internal use of AI can supercharge the core business.

• Microsoft: A $300bn+ annualised revenue software business still growing 18% YoY; Azure accounts of c. 1/3 of sales, which implies that the non-cloud units continue to expand at a very solid 2-digit % rate.
• Google: Search is a ~$200bn mature business, which grew 12% YoY – impressive for its scale.
• Amazon Retail: with over $0.5 trillion in annualised sales, it accelerated in Q2 to +11% YoY growth.
• Meta: is the posterchild of how AI can reinvigorate growth. Meta invests heavily in AI, but all investment is for in-house use to optimise its advertising platform; Meta has recovered from negative revenue growth only 3 years ago and has been able to sustain c.+20% revenue growth for about 8 consecutive quarters.

We should note that Apple and Tesla are a bit different. They do not build datacentres at scale and have no AI-linked revenues. But they are very much working on finding ways to use AI to take their businesses to the next level:

• Tesla is working on Robotaxis and the Humanoid Robot – both are in fact large AI projects. Although both businesses are still pre-revenue, but the stock valuation implies that investors assign a significant value to these AI-led startup ventures.
• Apple: its core business posted +10% growth in Q2 – best in 3 years. However, Apple is still lagging when it comes to AI innovation, so the acceleration is not yet clearly AI-related. But it gives confidence that successful AI integration in near future could drive further upside.

5. Rising capex shows long-term conviction

At the start of the year, investors worried about excessive capex and the risk of overcapacity. Instead, demand remains so strong that capacity constraints are holding back even stronger top-line growth.

• Post-Q2, combined capex forecasts have been revised up by 11% for 2025 and 20% for 2026. These four are also among Nvidia’s largest clients – a positive signal ahead of its Q2 report (27 Aug).
• Growing capex bodes well for Nvidia’s upcoming Q2 earnings report (27 August). Microsoft, Meta, Alphabet and Amazon are among Nvidia’s largest clients, and it is likely that the investment trends are equally robust among smaller cloud companies (such as Oracle, xAI, CoreWeave, or the Chinese hyperscalers).

Chart 4: Capex estimates have gone up for 2025 and even more so for 2026