Gene Munster Expects Google, AWS Cloud To Beat Q2 Estimates — Sees Higher AI Capex Growth in 2027

• Google Cloud is projected to outpace competitors with revenue expected to jump 70% year over year in June, above the consensus estimate of 64%. 
• Amazon’s AWS cloud is expected to grow 34% in the June quarter, up from 32% expected. 
• Strong demand for AI infrastructure is expected to drive earnings growth, offsetting valuation compression. 

Alphabet’s Google (GOOG) (GOOGL) and Amazon’s AWS (AMZN) cloud revenues are set to beat expectations in the quarter ending June, as per forecasts by Deepwater Asset Management’s Gene Munster. 

But the question remains whether the upsized outlook will impress investors in the tech space when beating earnings expectations is no longer enough. Tech firms are expected to beat estimates by a significant margin to justify the soaring capex plans. 

“The question is less about the magnitude of the upside and more about whether investors will reward the AI trade based on the improved outlook,” Gene Munster and Brian Baker of Deepwater Asset Management wrote in a note. 

“My sense is yes, given these higher expectations should drive AI infrastructure earnings growth that more than offsets multiple compression related to the law of large numbers.”

 Moreover, Munster believes that consensus CY27 hyperscaler capex growth estimates will increase from the current 23% year-on-year to 37%.

The AI Capex Outlook

The narrative surrounding AI infrastructure rests heavily on spending projections for next year. Consensus Wall Street expectations currently peg calendar year 2027 hyperscaler capex growth at 23% year-over-year.

Simple mathematical tracking indicates that if the bulk of recent funding expansions by market leaders shifts into next year’s deployments, aggregate hyperscaler capex growth could surge to 37% year-over-year, Munster said in his note. 

Meta is also anticipated to modestly boost its 2027 capex outlook to 25%, up from initial expectations of 21%.

The Cloud Landscape: Munster’s View 

 Munster believes that Google Cloud will stand out in the June cloud results, driven by its aggressive infrastructure buildout and effective customer acquisition through its family of models. “This strategy is projected to push Google Cloud's year-over-year revenue growth to a striking 70%, outperforming the Street's 64% projection,” Munster said.

Meanwhile, AWS will likely extend its outperformance streak as demand consistently outruns supply despite ongoing expansion efforts. This dynamic is forecast to yield a 34% year-over-year growth rate, beating the street consensus of 32%.

Conversely, Microsoft is anticipated to see the smallest upside among the top three, with its year-over-year growth projected to land exactly in line with expectations at 40%.

GOOGL, AMZN Stock: Retail View 

Retail sentiment on Stocktwits was ‘neutral’ for GOOGL stock and was ‘bearish’ for AMZN, with ‘normal’ message volumes. 

GOOGL stock gained 15% year-to-date, while AMZN rose 6% in the same period. 

Read More: Top Wall Street Banks Kick Off Q2 Earnings Next Week — Here's What Analysts Expect

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