All eyes were on capital expenditures when the big artificial-intelligence clouds reported earnings over the last two weeks. As it turned out, capex might not be the most significant metric.

Incremental margins -- the share of operating profit a company takes from each new dollar of revenue -- are what grabbed the attention of Melius Research analyst Ben Reitzes.

Amazon.com, Microsoft, and Google parent Alphabet added a combined $56 billion in new annualized cloud revenue in the second quarter. More impressively, incremental margin climbed to 50.9% from just 33.8% a year ago. In other words, for every dollar Microsoft Intelligent Cloud, Google Cloud, and Amazon Web Services earned over the last year, more than 50 cents flowed to operating income. Not bad.

"The message is clear," Reitzes wrote in a research note on Wednesday. "AI infrastructure is not a speculative buildout anymore."

Investors seem to agree. Microsoft stock is up 26% since the company reported earnings last Tuesday. Amazon has surged 17% from its Wednesday earnings print. Even Alphabet stock has gained about 6% despite an initial pullback after its earnings report a couple of weeks ago.

The story isn't about falling costs so much as more customers turning to clouds for increasingly complex, high-margin AI workloads, including the use of AI agents. That transition means enterprises are demanding access not just to advanced chips but also to networking, memory, data storage, and more. And they appear willing to pay for it.

Wider margins will help the cloud providers feel more comfortable with their vast data-center buildouts, which should mean continued success for chip makers and other hardware suppliers.

"AI is accelerating faster than hyperscalers can add facilities," Reitzes wrote. "In short, this is how these guys will get multiples -- and how they will all afford to buy more compute."

And that is good news for the AI trade.