Google Cloud, AWS Backlogs Reach $1.14 Trillion Amid Goldman Split

Goldman Sachs strategists Mark Wilson and Tony Pasquariello disagree over whether $1.14 trillion in cloud backlogs shows AI returns taking shape or masks a slowdown in broader earnings growth.

Google Cloud revenue increased 103% year over year, and its backlog climbed 256% to $561 billion. Amazon Web Services revenue grew 39%, while its backlog rose 189% to $578 billion. The two providers' backlogs total about $1.14 trillion.

Mark Wilson argues that the cloud growth and backlog figures show AI demand remains strong and that returns are beginning to materialize at large cloud providers. Wilson also sees the figures as addressing doubts about whether AI investment is paying off.

Pasquariello argues that cloud growth may conceal weakness in other core businesses. He says technology companies' rising capital spending has not demonstrated comparable earnings-growth potential, and points to slower upward revisions to forward earnings-per-share estimates. He also sees signs that S&P 500 earnings growth may have peaked.

Alphabet recorded a $910 million free cash flow outflow for the quarter, compared with market expectations for a $3.5 billion inflow. Goldman Sachs strategist Rich Privorotsky framed the broader issue as which companies in the AI industry will capture profits and what financing costs they will face.

In October, the S&P 500 excluding AI stocks outperformed technology shares. Both strategists described market volatility as unusual, but they differed on whether the AI rally would continue.