Citigroup has revised upward its revenue estimates for artificial intelligence services covering the calendar years 2026 through 2028, citing robust demand and improved monetization strategies at leading cloud providers. The investment bank increased its AI service revenue projections by 9% for 2026, 7% for 2027, and a significant 17% for 2028.
This adjustment follows strong performance metrics from major hyperscalers. Combined revenue for Amazon Web Services (AWS), Meta, Google, and Microsoft accelerated to 25% year-over-year growth in the third quarter. Furthermore, cloud revenue growth among the top three service providers surged to 56% year-over-year in the third quarter, marking an increase from 48% in the second quarter and 39% in the first quarter.
Individual company data highlights this momentum. Amazon has projected AWS growth exceeding 40% for both fiscal years 2027 and 2028. Google Cloud Platform reported that 2,600 customers consumed over 100 billion tokens in the last twelve months, up from 2,000 customers in the second quarter. Meanwhile, Microsoft noted a more than 75% quarter-over-quarter increase in Microsoft 365 Copilot customers utilizing consumption-based billing, and Fortune 500 spending on AWS nearly multiplied seven times year-over-year.
Despite the revenue optimism, some indicators of future demand showed signs of moderation. Combined quarter-over-quarter backlog additions slowed to $128 billion compared to $237 billion in the second quarter. Hyperscaler backlogs grew 142% year-over-year, representing a nine-point deceleration from the previous quarter against a tougher comparison. Additionally, Microsoft's commercial bookings declined by 11% in constant currency, a drop attributed to large Azure commitments made in the prior year.
Looking ahead, Citi forecasts global AI capital expenditures to reach $1.68 trillion in calendar year 2027, a 64% increase from 2026 levels. The top four hyperscalers are expected to account for approximately 64% of this total investment. In the infrastructure sector, SpaceX has raised its compute capacity target for the end of 2027 to approximately 13 gigawatts, up from a previous outlook of 5 to 10 gigawatts, while also targeting around 20 gigawatts of supporting power infrastructure.
Sources: Investing.com News.