Overview
- Following Q2 2026 earnings reported in late July, Alphabet, Amazon, Microsoft and Meta disclosed record or sharply higher capital spending and Alphabet recorded its first negative quarterly free cash flow since 2004.
- Bank of America now estimates hyperscaler AI capital expenditures at roughly $860 billion for 2026 with a path toward about $1.2 trillion in 2027 and forecasts aggregate free cash flow will swing from positive in 2025 to negative in 2026–2028.
- AWS chief executive Matt Garman said much of AWS capacity is “spoken for” through 2027 and into 2028, and Amazon reported AWS revenue up about 37% year over year alongside a very large quarterly capex jump.
- To fund the buildout, the largest cloud firms have leaned on capital markets and debt raises—about $270 billion of long‑dated debt issued by top providers so far in 2026—raising analysts’ concerns about funding risk and faster hardware depreciation.
- The spending surge is reshaping chip, memory and power supply chains and the key near‑term question is whether growing AI revenue, especially recurring inference demand, will monetize fast enough to restore cash generation and justify current valuations.