This audio is auto-generated. Please let us know if you have feedback.

The tech industry is facing a stark corporate paradox: even as the industry's largest vendors break growth records and reap unprecedented profits, they are still making massive layoffs to fund huge capital infrastructure investments.

According to Omdia (a sister company of Channel Dive), the combined revenue of the world's 18 largest tech vendors grew 28.3% year-over-year to $694 billion. This figure broke the analyst firm's initial high-end forecast of 21.8% and marked the strongest quarterly expansion for the index since 2010. Of the 18 vendors tracked, 15 exceeded their high-end expectations, with 10 setting historical records.

What's behind this? Omdia chief analyst Matthew Ball and research analyst Srikara Upadhyaya wrote in a May report that this is a "decisive shift in AI economics." In other words, enterprise AI has officially moved from experimental trials to actual production environments, triggering broad, multi-layered spending across all levels of the IT stack.

At the infrastructure level, enterprise buyers are expanding investments from GPUs to custom AI processors, high-performance networking, and advanced memory to support complex agentic AI workloads.

Omdia noted that surging demand combined with supply constraints has prompted customers to place hardware orders in advance. Meanwhile,Nvidia's data center revenuegrew 75% year-over-year to $62 billion, while Dell Technologies' AI-optimizedserver revenuesoared 342% to $9 billion.

At the cloud level, hyperscalers' backlogs grew withunprecedented capacity demand. AWS reported unfinished projects of $364 billion, while signing new agreements with Anthropic, OpenAI, and Meta. Even so, the world's largest public cloud provider saw revenue grow 28%—the fastest pace in 15 quarters—pushing its annualized run rate to $150 billion.

Microsoft's cloud revenue grew 29% to $54.5 billion, with Azure up 40%, covering both AI and non-AI usage. Google Cloud revenue surged 63%, exceeding $20 billion. Revenue from products built on Google Cloud's generative AI grew 800%, and the company's total backlog nearly doubled to $462 billion, according to Omdia data.

The key point is that the revenue explosion has brought a huge profit dividend. The combined net profit of the 18 tech giants tracked by Omdia grew 64% year-over-year to $234 billion. Ball and Upadhyaya wrote that while profits were partly boosted by equity valuation gains for AI developer Anthropic after its Series G round, the main drivers were strict cost restructuring and AI-driven efficiency improvements implemented over the past 12 to 18 months.

The profit boom has exposed a widening corporate divide. This quarter, four tech giants announced layoffs, cutting a total of 58,000 jobs. Oracle cut about 18% of its workforce to control operating costs while planning to invest$50 billion in data center infrastructure. Microsoft hinted at more layoffs ahead, despite its AI annualized run rate growing 123% to $37 billion.

Although executives often cite AI-driven efficiency as the reason for layoffs, Ball and Upadhyaya said the real driver is a necessary corporate contraction following the over-hiring boom during the pandemic in 2021.

For channel partners, distributors, and the broader IT ecosystem, these opposing forces bring intense margin pressure while also creating new pipeline opportunities.Rising component costsare squeezing hardware margins, with no relief expected before 2027. Additionally, traditional software revenue is eroding as automated AI agents replace standalone applications, threatening traditional seat-based SaaS monetization models, analysts said.

To sustain profitability, partners must quickly shift from simple software reselling to deep system integration, high-performance network orchestration, and customized deployment services for agentic architectures.

Omdia has raised its midpoint forecast for the tech giants' full-year 2026 revenue growth to 26.8%. This revised trajectory puts the index's total revenue on track to break the historic $3 trillion mark this year—just two years after crossing $2 trillion.