While AWS and Microsoft were the undisputed hyperscaler leaders in the early cloud era, Google Cloud and Oracle continue to be the magic-makers here in the AI era with their latest breakthrough being the use of debt and equity financing to fund the unprecedented costs of AI data-center buildouts.
Let’s start with first-mover Oracle, and then look at the recent moves from Google Cloud parent company Alphabet.
Late last year, Oracle triggered near-fatal conniptions across the Luddite wings of the tech and finance sectors when it announced that explosive customer demand for its Oracle Cloud Infrastructure (OCI) would require it to raise capital via borrowing for data center expansions to meet that customer demand. That decision led to hysterics typified by this Yahoo Finance headline: “Oracle stock sinks as reported AI data center snag puts rising debt in focus.”
But just three months later, Oracle completely justified its move as it reported that fiscal-Q3 RPO had jumped 325% to $553 billion. So we have an immensely profitable, well-run, and high-growth company borrowing a manageable amount of money — between $40 billion and $50 billion — to meet $553 billion in contracted customer business.
But the move triggered hysteria among the “but nobody’s ever done it that way before!!” crowd, who seemed to somehow forget or overlook the fact that Oracle is one of only two companies — the other being Microsoft — in the history of the world to have fully contracted backlog exceeding half a trillion dollars!
Here’s part of the story laid out by Oracle in a Feb. 1 press release about its novel fund-raising efforts:
Oracle is raising money in order to build additional capacity to meet the contracted demand from our largest Oracle Cloud Infrastructure customers, including AMD, Meta, NVIDIA, OpenAI, TikTok, xAI and others.
Oracle expects to raise $45 to $50 billion of gross cash proceeds during the 2026 calendar year. The company plans to achieve its funding objective by using a balanced combination of debt and equity financing to maintain a solid investment-grade balance sheet.
While the six AI/tech customers cited by Oracle in that excerpt account for a large portion of that $553 backlog, OCI has simultaneously made huge inroads among non-tech companies, so the whole melodramatic pearl-clutching over “But what about if OpenAI can’t pay its bills?!?” becomes even more absurd.
Community Summit North America is the largest independent innovation, education, and training event for Microsoft business applications delivered by Expert Users, Microsoft Leaders, MVPs, and Partners. Register now to attend Community Summit in Nashville, TN from October 11-15.
World’s Most-Valuable Company Taps into External Funding as Well
But over the past week, we’ve come to learn that even the world’s most-valuable company, Alphabet — with a market cap of about $4.5 trillion — has also determined that the challenge of meeting customer demand unlike anything the business world has ever seen calls for new approaches:
Alphabet Inc. today announced equity offerings totaling $80 billion, in expected aggregate amount, as part of its plan to fund investments in its world-class AI compute infrastructure to meet its unprecedented customer demand.
And what rationale did Alphabet offer for its decision to seek novel ways to fund its explosive AI ambitions? The emergence of “an expansionary moment” leading to a “significant growth opportunity ahead,” which in laymen’s terms boils down to astonishingly powerful customer demand:
AI is driving an expansionary moment for Alphabet. The company is experiencing strong demand for its AI solutions and services from enterprises and consumers, at levels that are exceeding the company’s available supply. By scaling its investments, the company seeks to expand its foundational infrastructure to support the significant growth opportunity ahead. During its Q1 2026 earnings call, Alphabet announced that its 2026 capital expenditures are expected to be $180-$190 billion, and that it expects 2027 capital expenditures to significantly increase compared to 2026. This equity offering is part of Alphabet’s plan to fund its investments in a balanced way while retaining a healthy balance sheet.
Alphabet then described some of the growth drivers that spurred its decision to go outside for funding, and I’ll share three of those factors, starting with the remarkable Q1 numbers for Google Cloud posted several weeks ago:
Google Cloud: Revenue grew 63% year-over-year in Q1 2026, with backlog nearly doubling quarter-over-quarter to more than $460 billion, with approximately 50% expected to be recognized as revenue over the next 24 months.
Google Subscriptions: Google reached 350 million paid subscriptions, with Q1 2026 representing the company’s strongest quarter ever for consumer AI plans.
Developers: Google now has over 8.5 million developers building new experiences with its models monthly and its first-party model APIs are processing 19 billion tokens per minute, a 6x increase year-over-year.
Final Thought
AWS plans to spend about $200 billion on CapEx this year, and for Microsoft the total will probably be about $170 billion. Each company deserves great credit for being able to continue funding that almost-unfathomable level of investment through internal means.
But, I think Alphabet’s decision to seek new ways of funding levels of investment the world has never seen in order to meet customer demand on a scale the world has also never witnessed has sparked a lot of thinking at the top levels of Amazon and Microsoft.
And, I would not be the least bit surprised if one or both companies undertakes similar funding plans to finance the critical infrastructure that underpins the greatest growth market the world has ever known.
Ask Cloud Wars AI Agent about this analysis
