Citi has increased its artificial intelligence service revenue forecasts for 2026 through 2028, citing sustained demand for AI services and stronger monetisation across major cloud computing providers.
The investment bank raised its AI revenue estimates by 9% for 2026, 7% for 2027 and 17% for 2028, reflecting expectations for continued expansion in AI-related cloud services.
Combined revenue growth at Amazon Web Services (AWS), Meta Platforms (NASDAQ:META), Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) accelerated to 25% year over year in the third quarter.
Meanwhile, cloud revenue growth among the three largest providers reached 56%, compared with 48% in the second quarter and 39% in the first quarter.
AWS, Google and Microsoft Report Strong AI Adoption
Amazon (NASDAQ:AMZN) projected AWS revenue growth exceeding 40% in both fiscal 2027 and 2028, reflecting expectations for sustained demand for cloud infrastructure.
Google Cloud Platform reported that 2,600 customers consumed more than 100 billion tokens over the preceding 12 months, up from 2,000 customers in the second quarter.
Microsoft also recorded growing enterprise adoption, with the number of Microsoft 365 Copilot customers using consumption-based billing increasing more than 75% quarter over quarter.
Additionally, spending by Fortune 500 companies on AWS increased nearly sevenfold compared with the previous year.
The figures highlighted expanding corporate use of AI services and growing demand for computing capacity.
Hyperscaler Backlogs Continue Growing Despite Slower Additions
Although AI demand remained strong, Citi identified some moderation in new backlog additions among major cloud providers.
Combined quarterly backlog additions declined to $128 billion from $237 billion in the second quarter.
Total hyperscaler backlogs increased 142% year over year, although the growth rate slowed by nine percentage points compared with the previous quarter, against a comparison base that was 14 percentage points more demanding.
Microsoft’s commercial bookings fell 11% in constant currency, partly reflecting unusually large Azure commitments recorded in the previous year.
Despite the slower pace of new commitments, the substantial increase in existing backlogs continued to indicate significant contracted demand for cloud services.
Global AI Investment Expected to Reach $1.68 Trillion in 2027
Citi forecasts worldwide AI capital expenditure of $1.68 trillion in calendar 2027, representing a 64% increase from 2026.
The four largest hyperscalers are expected to account for approximately 64% of total spending, highlighting the concentration of infrastructure investment among major technology companies.
SpaceX (NASDAQ:SPCX) also increased its year-end 2027 computing capacity target to approximately 13 gigawatts, compared with its previous projection of 5 to 10 gigawatts.
The company is additionally targeting around 20 gigawatts of supporting power infrastructure.
The revised capacity targets illustrate the increasing scale of computing and energy resources associated with AI development.
AI Revenue Growth Supports Continued Infrastructure Expansion
Citi’s upgraded forecasts reflect expectations that enterprise AI adoption and cloud service monetisation will continue strengthening over the next several years.
Although quarterly backlog additions moderated, strong cloud revenue growth, increased AI usage and substantial planned capital expenditure suggest continued demand for infrastructure.
Investors will monitor whether major technology companies can convert expanding AI investment into sustained revenue growth and improved profitability.