Why AI remains in the spotlight: US mega-techs power earnings season

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THE AI RACE IS HEATING UP, AND WHILE TECH LEADS THE CHARGE, NON-TECHS ARE INVESTING AT LARGE.

‍The latest earnings season reaffirmed a simple truth: US mega-tech continues to define the direction of the market. The quarter offered great clarity as to the strategic focus of mega-tech names, be it cloud resilience, the acceleration of AI monetisation, and ongoing efforts to turn innovation into recurring growth.

Not only did results for most of the ‘Magnificent Seven’ comfortably exceed expectations, but a distinguishing feature this quarter was the emergence of visible, commercial traction from AI.

Make no mistake, tech heavyweights are finding their feet with AI monetisation, and even non-techs are getting in on the action. These holdings are at the core of the Global Growth Portfolio and continue to deliver dominant earnings, strong margins, and increasing returns.

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Apple marching to the beat of its own drum

Investors had their eyes trained on Apple’s iPhone 17 uptake, and for good reason, with the next-gen phone providing a windfall for the hardware giant.

Strong demand for the phone - especially top-spec models - underpinned a 6% increase in iPhone sales, which we saw as a remarkable feat in light of the mature nature of the smartphone market.

Meanwhile, the company’s services segment carried growth, fuelled by the App Store, subscriptions, and advertising. Apple’s narrative is increasingly defined by the durability of its installed base and the expanding ecosystem of high-margin digital services that orbit it.

Apple’s AI ambitions took more concrete shape this quarter, even though the company remains more restrained than its peers. In our view, the emphasis surrounding Apple’s plans centres on incremental integration rather than rapid reinvention.

That would fit the company’s historical rhythm, with AI less of a standalone revenue stream as much as something enhancing Apple’s long-term ecosystem.

Nevertheless, AAPL’s growth story continues to hinge on how effectively services can offset hardware cyclicality, but the near-term outlook will still benefit from the looming holiday period.

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Microsoft’s cloud channel keeps delivering

Earnings from Microsoft confirmed its status as the defining enterprise platform of the era.

The company’s cloud franchise remains robust, led by Azure, which continues to grow market share and yield industry-leading growth among hyperscalers. Unlike prior quarters, what impressed most this season was the breadth of AI adoption across Microsoft’s customer base.

From enterprise software integrations to developer services, AI is no longer a conceptual layer and is now built into productivity and infrastructure offerings. Microsoft’s Copilot AI assistant is showing signs of a steady ramp-up in paid adoption, which bodes well for future momentum.

A key point is the fact that Microsoft has positioned itself as both a provider of cloud infrastructure, and a vendor of AI-powered software that sits above it, providing a distinct competitive advantage.

With enterprise IT budgets still growing, and digital transformation tied to AI productivity gains, the macro environment should play directly to MSFT’s strengths.

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Amazon AWS accelerates as AI rolls out

Amazon’s third quarter was dominated by the rebound of its cloud division, AWS, which showed renewed growth after a tougher time over recent quarters. Improvement reflects cyclical normalisation as enterprise optimisation cycles ease, and the first wave of incremental demand from generative AI workloads.

Enterprises building and deploying large models are increasingly relying on AWS infrastructure, which is why Amazon has invested aggressively to meet said demand. As capital expenditure ramps up to build data centres and custom chips, Amazon’s strategy rests on owning the infrastructure of the AI economy.

Elsewhere, the launch of Amazon’s new AI assistant, Amazon Q, underscores the company’s ambition to move beyond infrastructure and into the application layer.

While in its infancy, Q is designed to keep developers and corporate users within Amazon’s ecosystem, which we believe will drive ‘stickiness’. Beyond cloud, Amazon’s advertising business continues to shine, benefiting from improved retail engagement and AIdriven optimisation in campaign placement.

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Meta looks to turn AI into engagement

Meta has begun rolling out its suite of AI features, with the most recent quarter proving an opportunity for the company to demonstrate how AI can enhance user experience and advertising yield.

These products are feeding engagement signals into Meta’s ad targeting systems, with management confident said technology can improve recommendation algorithms and boost time-spent metrics and ad relevance. What makes this iteration more compelling is that Meta’s generative AI tools are designed to keep users creating and interacting within its platforms as part of a closed-loop dynamic.

Meta remains committed to long-term investment in infrastructure, particularly in training and inference capacity for its open-source models. We also saw signs of a stable backdrop with ad budgets returning, plus engagement remaining high.

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Alphabet’s AI evolution and leverage

In terms of core operations, Alphabet’s advertising business continued to perform well through the most recent quarter, aided by steady YouTube and search growth. However, the real focal point of GOOGL’s report was its flagship AI model suite, Gemini, with clear signs the company intends to embed generative AI into every layer of its ecosystem.

Gemini’s rollout across Search, Workspace, and the Cloud division showed strong growth through the quarter. The company has made visible progress in commercialising AI through both consumer channels and enterprise licensing.

At the same time, the introduction of AI-enhanced search experiences and conversational interfaces signals that Google has the potential to redefine how users interact with info in its sights. And naturally, Google Cloud continued its steady rise, benefiting from strong enterprise adoption and AI-related demand.

A backlog of signed cloud deals points to sustained growth into 2026, and management has emphasised profitability improvements. With Gemini gaining traction and YouTube monetisation recovering, we view Alphabet’s broader growth narrative as compelling.

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A non-exclusive growth tailwind for markets

The third quarter marked a point where AI shifted from concept to contribution. While mega-tech names are building their businesses around it - with cloud spending accelerating, and consumer ecosystems integrating AI-driven features - there are signs of uptake elsewhere.

Global AI capex is booming, and even non-tech players such as Eli Lilly and UnitedHealth are investing in AI applications. AI has become a commercial frontier. And that is something we’re positioned to benefit across layers of the stack.