1Q26 growth expectations for AWS, Azure, and Google Cloud are high but achievable

Overview

This report is UBS's cloud infrastructure preview for AWS, Microsoft Azure, and Google Cloud ahead of their 1Q26 earnings releases. The core conclusion is that demand for cloud-hosted GPUs and CPUs is rising at an unusual pace, enterprise IT budgets are tilting toward AI, data, and cloud infrastructure, and although growth expectations for the three major cloud providers have already been raised by investors, there is still sufficient demand support. UBS therefore favors the long-compute/infra theme.

Core views

UBS believes the demand backdrop for the three major cloud providers is very strong: in 4Q25, AWS, Azure, and Google Cloud generated combined revenue of $78.3 billion, implying an annualized revenue run rate of about $313 billion, with aggregate growth of 33% and acceleration for three consecutive quarters; committed backlog at five key cloud infrastructure companies reached $1.7 trillion at the end of 2025, providing revenue visibility for the next 5-7 years. Customer checks show that AI, token usage, data integration, developer tools such as Copilot and Claude Code, and platforms such as AWS Bedrock are driving enterprise cloud spending. Microsoft Azure may be deliberately throttled as scarce GPU capacity is redirected to internal/first-party demand, making the acceleration potential for AWS and Google Cloud relatively more visible.

Analysis framework

The report combines surveys of enterprise customers, partners, and general contractors, and reviews 4Q25 cloud-provider revenue, growth, sequential increment, backlog, share-price performance, growth of GPU cloud providers, as well as Anthropic/OpenAI demand, AI capacity build-out, and capex trends. The analysis focuses both on the roughly 90% of traditional CPU cloud workloads and on the impact of AI/GPU demand on cloud infrastructure growth and market expectations.

Methodology notes

• channel_checksCustomer and partner checks

  Assess the strength of 1Q26 cloud demand through feedback from enterprise IT leaders, cloud partners, and construction-related parties.

  UBS uses feedback on customer budgets, cloud migration, AI tool adoption, token usage, platform selection, and capacity build-out to test whether AWS, Azure, and Google Cloud can meet buy-side expectations for growth.

• earnings_previewBuy-side growth hurdle analysis

  Compare market-implied revenue growth expectations with demand, capacity, and year-over-year base effects.

  The report estimates that investor growth hurdles for 1Q26 are about 38-39% for Azure, 29-30% for AWS, and 58-59% for Google Cloud, and concludes that demand strength is sufficient to support these high expectations.

• industry_analysisCloud infrastructure demand layering

  Differentiate among traditional CPU workloads, GPU/AI training and inference demand, AI development platforms, and agent orchestration layer demand.

  UBS believes AI's pull on cloud providers is expanding from GPU/TPU/Trainium capacity into development platforms such as Bedrock, Foundry, OpenAI API, and Vertex, as well as the enterprise data layer.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Amazon / AWS

  Core beneficiary

  Strengths

  AWS remains the leader in cloud infrastructure, with strong demand for Bedrock and enterprise AI development platforms, while Anthropic and enterprise AI spending may drive growth.

  Weaknesses

  Buy-side growth hurdles have already risen, and some checks suggest traditional enterprise share may shift toward Azure, OCI, and GCP.

  Comparison

  Relative to Azure, AWS is more likely to see growth acceleration in 1Q26; relative to Google Cloud, AWS is larger in scale, though the improvement in data and AI reputation may be less pronounced.

  Risks

  Capacity ramp falls short of expectations, growth expectations become overheated, AI gross margins come in below expectations, and enterprises optimize cloud bills.

• Microsoft Azure

  Core beneficiary but with a more balanced near-term setup

  Strengths

  Azure has strong advantages in enterprise AI, Copilot, OpenAI access, and existing enterprise agreements, and rising customer token usage will increase Azure spending.

  Weaknesses

  UBS believes Microsoft may redirect scarce GPU capacity to internal/first-party demand, thereby intentionally limiting Azure's external growth.

  Comparison

  Azure's growth remains higher than AWS's, but near-term acceleration potential may be weaker than that of AWS and Google Cloud.

  Risks

  Internal demand crowds out external cloud revenue, investor expectations are too high, and AI capacity and capex pressures intensify.

• Alphabet / Google Cloud

  Market-share gain beneficiary

  Strengths

  Google Cloud is seeing strong feedback in data, AI, BigQuery, Gemini, and enterprise data integration, with some customers shifting from Azure to Google.

  Weaknesses

  Growth expectations are very high, requiring continued proof that enterprise migration and AI workloads are converting into revenue.

  Comparison

  Compared with AWS and Azure, Google Cloud is seeing more obvious improvement in reputation in data and AI use cases and may continue to gain share.

  Risks

  Growth hurdles are too high, capacity constraints, and competitors' advantages in enterprise agreements and ecosystem.

• Oracle / CoreWeave / Nebius and other GPU clouds

  Demand proxies and supplemental beneficiaries

  Strengths

  GPU-centric cloud providers are growing rapidly, reflecting continued strong GPU demand from model developers, AI startups, and enterprises.

  Weaknesses

  Some providers act as subcontractors or capacity supplements to the three major clouds, creating a risk of double counting revenue with the major clouds.

  Comparison

  Growth is faster than that of the three major clouds, but comparability on scale, customer mix, and profit quality is weaker.

  Risks

  GPU costs, financing dependence, customer concentration, price competition, and supply-chain delays.

Key data

• Combined 4Q25 revenue of the three major clouds$78.3bnCombined revenue of AWS, Azure, and Google Cloud, implying an annualized run rate of about $313bn.
• Combined 4Q25 growth of the three major clouds33% y/yAcceleration for three consecutive quarters, up 9 percentage points from 24% in 1Q25.
• Sequential revenue increase of the three major clouds in 4Q25$6.7bnUp 114% year over year, marking the third consecutive quarter of record-high sequential dollar growth.
• 1Q26 Azure buy-side growth hurdle38-39%UBS believes Microsoft may proactively throttle Azure growth to serve internal/first-party GPU demand.
• 1Q26 AWS buy-side growth hurdle29-30%UBS believes AWS growth could accelerate meaningfully, with demand conditions sufficient to support elevated expectations.
• 1Q26 Google Cloud buy-side growth hurdle58-59%Google Cloud is benefiting from data, AI, and Anthropic-related demand, with channel feedback remaining strong.
• Backlog at key cloud infrastructure companies$1.7tnCommitted backlog as of end-2025, indicating revenue visibility for the next 5-7 years.
• Combined 4Q25 growth of emerging GPU clouds83%GPU-centric cloud providers such as Oracle, CoreWeave, and Nebius indicate that AI/GPU demand remains strong.
• AWS Bedrock customer feedbackspend increased 50% y/yCustomers said AWS Bedrock spending increased at least 50% year over year and may be an underestimate.

Impact & implications

If UBS is correct, the key debate around cloud infrastructure stocks will shift from whether AI capex is excessive to whether compute and cloud-platform revenue can be realized. Strong demand could support AWS, Google Cloud, and related GPU cloud and data-center capex supply chains, while putting pressure on budgets for traditional SaaS, IT services, and non-AI software.

Risks

• Investor expectations for 1Q26 growth at AWS and Google Cloud have already risen meaningfully; if capacity ramp or revenue recognition falls short of expectations, share prices could come under pressure.
• AI capex and data-center construction may continue to increase market concerns about gross margins and free cash flow.
• Delays and price inflation in components such as GPUs, memory, and storage still exist and may affect the pace of capacity delivery.
• Microsoft allocating more GPU capacity to internal/first-party demand may limit the acceleration of Azure's external cloud revenue.
• Enterprise FinOps optimization and cuts to non-essential contracts may offset part of the growth in cloud spending.
• If margins on AI revenue are lower than those of traditional cloud revenue, the support that strong revenue growth provides to valuations may weaken.

What to watch

• Cloud revenue growth, AI contribution, and capacity-constraint commentary disclosed by Microsoft, Amazon, and Google on their 1Q26 earnings calls.
• Whether AWS, Azure, and Google Cloud meet or exceed buy-side growth hurdles: Azure 38-39%, AWS 29-30%, and Google Cloud 58-59%.
• Whether management maintains or raises 2026 capex guidance.
• The degree of compute constraints at Anthropic and OpenAI, cloud-partner spending, and the resulting pull on AWS and Google Cloud.
• The pace of enterprise adoption on platforms related to AWS Bedrock, Azure Foundry/OpenAI API, Google Vertex, and Gemini.
• Whether Google Cloud continues to gain share in data and AI workloads.
• Revenue growth, capacity ramp, and order changes at emerging GPU cloud providers such as Oracle, CoreWeave, and Nebius.