How tech giants generate their revenue
Each of the major technology companies has a distinct business model, though all share the characteristic of very high operating leverage — the cost of serving an additional customer is near zero once the platform is built. Google earns 90%+ of its revenue from advertising against search queries. Microsoft earns from enterprise software subscriptions (Office 365, Azure cloud services, LinkedIn). Apple earns from hardware (iPhone, Mac, iPad) and a growing services segment (App Store, iCloud, Apple TV+). Amazon earns from e-commerce, Amazon Web Services (cloud computing), and advertising.
The highest-margin business among all of these is cloud computing. AWS, Azure and Google Cloud all generate operating margins of 30-40% — meaning for every $100 in cloud revenue, $30-40 falls to profit. This is why all three parent companies are aggressively investing in cloud and AI infrastructure.
The AI investment cycle
In 2025-2026, the major tech companies collectively announced capital expenditure plans of over $300 billion for AI infrastructure — data centres, custom chips, power capacity and cooling. Microsoft alone plans to spend $80 billion in 2025. This investment is both a response to genuine AI demand and a defensive move to ensure they are not disrupted by AI-native competitors.
The economics are complex. Training and running AI models is extremely expensive — OpenAI reportedly loses money on some of its cheapest subscription tiers because inference costs exceed subscription revenue. The companies investing most heavily in AI infrastructure are betting that the eventual revenue from AI products will justify the capital outlay. This is the defining bet of the current technology era.