A First Half 2026 Review of Cloud infrastructure

As of this writing, major Cloud infrastructure companies are significantly underperforming broader indices, particularly when compared to the Semiconductor sector. However, we anticipate that hyperscalers are positioned for massive outperformance heading into Q2 2026 earnings.

As we review expectations for the second half of 2026 and 2027—and approach the anticipated IPOs and fresh monetization cycles of frontier model developers like Anthropic and OpenAI—the market is mispricing the imminent wave of Cloud revenue acceleration.”

But we will defend that this segment of companies should have the best performance going to 2Q26 Earnings and reviewing 2H26 and 2027 expectations, as we also approach the IPO (and fresh monetization) of the frontier model companies Anthropic and OpenAI.

Cloud Revenues

What we observe since our last update is that the Hyperscalers Cloud Revenues Accelerated meaningfully from +26% to +37% YoY!

These are not promises, this are tangible revenues from offering compute power for the AI revolution, that we are hearing from companies from all industries in the economy (from Healthcare and Pharma, to Financials Services).

This revenue is model agnostic as the Cloud companies benefit from clients trying and experimenting with different models. Their driver is the AI Adoption and Consumption.

The growth between the players shows the Accelerating trend that we should continue to observe in 2H26!

• Oracle: In Calendar 2Q26, Oracle accelerated further to +93% YoY!! Oracle is getting an advantage from its infrastructure and network design as well as their position in Database Management Software.

In the first half of 2026 we can see that Database companies, like Snowflake and MongoDB, are benefitting from the importance of the data layer for AI context (idea for future article).

Lets not forget that Oracle also managed to negotiate contracts with the 3 world largest hyperscalers so it can put OCI inside their DataCenters accelerating multi-cloud migrations (they present this contracts as recognized revenues and cost associated with a payment for the partners).

• Azure is currently posting a robust 40% growth, but leading indicators suggest a steep acceleration in 2H26. As the primary beneficiary of OpenAI’s training and inference workloads, Azure’s growth is currently bottlenecked only by supply constraints.

More importantly, the proliferation of Agentic AI within the Microsoft Software Suite is driving massive, continuous compute demand that outpaces conversational AI.

Both Microsoft and Oracle are uniquely positioned here; the market is wrongfully discounting their software revenues, failing to price in how infrastructure and application marketplaces compound when enterprises aggressively migrate on-prem data to fuel autonomous agents.

• Google is registering an incredible acceleration in Google Cloud revenues, doubling from +33% to +63% growth in 1Q26, its an impressive performance given their scale!

Google benefits from its vertical integration with own infrastructure (TPUs), platform and LLM development, being Gemini3 a major driver of GCP consumption. Google AI for Ads is also a huge application and is transforming the ad ecosystem with AI tools for advertisers. Google also is an important infrastructure partner for Anthropic training and Claude workloads.

• AWS is the largest of the players and also the last player to ramp AI capex (see below).

AWS, the largest player by market share, was the last to aggressively ramp up AI capital expenditures, doing so largely after Q2 2024. Consequently, it is natural that AWS is exhibiting a delayed revenue acceleration compared to early movers like Microsoft. However, AWS growth has finally shifted gears, accelerating from 20% in Q3 2025 to 28% in Q1 2026.

With the upcoming ramp of Project Rainier (Anthropic’s training cluster), we expect AWS to breach the 30%+ growth threshold in Q2 2026, confirming that their delayed CapEx cycle is now translating into tangible revenue.

But besides the uneven distribution of new revenues between the hyperscalers, what we see is that the Delta Revenue is in a new level from what we were seeing previous quarters: 1Q26 Delta revenues for the 4 Cloud companies were 3X the revenue addition in 1Q25!!

But MORE important than the revenues numbers are the DEMAND SIGNALS.

• Oracle FY 4Q26 Earnings Call:

“Remaining performance obligations, or RPO, ended the quarter at $523.3 billion, up 433% from last year and up $68 billion since the end of August, driven by contracts signed with Meta, NVIDIA and others as we continue to diversify our customer backlog.”

“AI, of course, is a great Cloud Infrastructure play, but it’s also a broader software play for Oracle. It’s driving growth in our applications, in our database businesses as well… We’re seeing a clear AI halo effect for our cloud applications, which is driving upgrades, our AI data platform, combined with our applications is an absolute conversation changer, and it brings the Oracle database and all of our applications into the center of the modern agentic enterprise.

“Training AI models on public data is the largest, fastest-growing business in history. AI models reasoning on private data will be an even larger and more valuable business. Oracle databases contain most of the world’s high-value private data.”

• Microsoft

“We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload. This will drive TAM expansion and change the value creation equation across the entire economy.”

“And so this, I mean, it’s fascinating that here we are in 2026 and the most exciting things are plug-ins in Word or Excel or CLIs in coding or — and so when you see that, that means we have a structural position in knowledge work, coding, security, which are the big TAMs. And then you couple that with the right business model… which is user plus usage.”

“Even with these additional investments and continued efforts to bring GPU, CPU and storage capacity online faster, we expect to remain constrained at least through 2026. Despite these constraints, and the continued need to balance incoming supply, we expect Azure growth to show modest acceleration in the second half of the calendar year…”

• Google

“Cloud accelerated again this quarter due to strong demand for our AI products and infrastructure. Revenue grew 63%, exceeding $20 billion for the first time and our backlog nearly doubled quarter-on-quarter to over $460 billion.”

“Our enterprise AI solutions have become our primary growth driver for cloud for the first time. We are winning new customers faster with new customer acquisition doubling compared to the same period last year. We are seeing strong deal momentum signing multiple $1 billion-plus deals.”

“And we are deepening relationships with existing customers. Customers outpaced their initial commitments by 45%, accelerating over last quarter.”

“The largest contributor to cloud’s growth this quarter was AI solutions, driven by strong demand for industry-leading models, including Gemini 3. In addition, we had strong growth in AI infrastructure due to continued deployment of TPUs and GPUs and core GCP continues to be a sizable contributor driven by demand for infrastructure and other services such as cybersecurity and data analytics.”

• Amazon

“Starting with AWS, growth continued to accelerate, up 28% year-over-year, the fastest growth rate in 15 quarters, up $2 billion quarter-over-quarter, the largest Q4 to Q1 AWS revenue increase ever.”

“In the first 3 years of this AI wave, AWS’ AI revenue run rate is over $15 billion, nearly 260x larger.” “Our AI revenue is growing triple digits year-over-year.”

“We also see a strong correlation between AI spend and core growth. As customers spend more on AI, we see a corresponding demand increase in core. We expect this to increase over time as customers move more AI workloads into production, strengthening demand for our core services.”

“AI is commonly seen as a GPU story, but the rise of agentic workloads, real-time reasoning, code generation, reinforcement learning and multistep task orchestration is driving massive CPU demand as well. As AI systems shift from answering questions to taking actions, and as post-training and inference scale up, the compute required pulls heavily on CPUs.”

Cloud Capex

Now, the risks are the immense Capital Expenditures. Companies face a dilemma: You invest too little and you will lose clients, you invest too much, prices go down and your return says bye bye.

And the fact is that Cloud Capex is growing strong, stronger than revenues.

We see from the chart above that Microsoft was the first and accelerated in 2023 followed buy Google. We believe that’s why we see Microsoft outgrowing AWS, Microsoft was a early capex mover!

Google also as an early mover is also showing an incredible acceleration to +63% as we saw before!

We see Amazon ramping capex strongly after 2Q24, the latest of the hyperscalers to ramp up AI capex more significantly. So we is believe its natural that AWS is taking a little longer to show the AI acceleration, but since our last call the AWS revenue accelerate 8pp, which give us much comfort in our thesis that we should see even more acceleration past +30%!

And Oracle was also in the “late” stage, but came with much more aggressiveness, which explains why they are accelerating so fast, also in the 90%+ range.

We are also very familiarized with the hyperscaler commitment to USD 700 bi in capex in 2026. But when we see the Wave off Cloud Revenue Growth, we feel good about the prospects for 2H26 and 2027!

All these investments are great news for Semiconductors and Hardware companies. They started to see this wave of demand sooner from hyperscalers and startups.

But now we are seeing the ramp into production of AI Agentic Applications, which should confirm our thesis that this is the year of the Cloud Wave!

The Cloud Wave

And the chart below shows exactly what we are observing! Its already coming!

This is a core Chart. First, we saw Capex accelerating mainly after 2Q24. New Data Center leadtimes runs from 18 to 24+ months, so we saw capex growing strong for 18 months (6 quarters between 2Q24 an 3Q25) and now capex growth accelerated even more on 4Q25 and 1Q26!

As the market focus on the dangers of capex, what we sees is that Revenue Aceleration is finally coming from the 2024-2025 Investments and the Cloud players are doubling down as they see the rise in consumption, as well as revenues and orders growing and the cash flowing!

We don’t have a crystal ball and don’t pretend to know anything for sure, but Future Performance Obligations can be a great indicative of this future demand, once they imply heavy penalties for cancelations.

We see already USD 2 Trillion in revenue contracted within the clouds, which include at least +600 bi from Open AI, but even so, is a much more robust client base including Meta, Nvidia, Sovereign clients and clients from all industries like Banks, Healthcare and Telecom companies.

Even with the the Capex matching the CFO in 1Q, the long term cash flow trend points to an acceleration of Operational Cash Flow generation. Note that the CFO in 1Q26 was USD 120 bi Quarterly, 2X higher than 1Q23 and still enough to pay the Capex budget!

A crucial differentiator between today’s AI proliferation and the 1999 Internet Bubble is the structural level of global connectivity. In 1999, roughly 150 million people were online globally. Today, we are deploying AI against a ‘Day 0’ addressable market of 6 billion connected humans, backed by a drastically more mature ecosystem of digital consumption and data production.

But this thesis goes far beyond human users. As Agentic AI advances into Robotics, Life Sciences, Industrial Digital Twins, and Computer Vision, we are shifting from human-prompted text generation to continuous, machine-to-machine autonomous operations. The sheer volume of data generated, processed, and acted upon by these interconnected agents will be exponentially higher, driving an estimated 40x increase in global compute demand by 2030.

It is true that we will only recognize a bubble when it is already popping—that is the very nature of market cycles. However, here at CoreValueCapital, we are highly confident in the structural, fundamentally driven growth we are observing. We believe the market will continue to see a massive payoff from these hyperscaler cloud investments in the years to come.

Currently, Cloud valuations sit at a significant discount relative to Semiconductor and hardware companies. Yet, the fundamental logic of the technology value chain dictates that the massive CapEx flowing into silicon today must ultimately translate into compounding software and infrastructure revenues for the Cloud providers tomorrow.

We look forward to exploring this further in our next update.

Thank you,

CoreValueCapital Team