AI spending is eating into the hyperscalers' free cash flow
Microsoft, Amazon, Alphabet, Meta and Oracle spent $566bn on capex in the last four quarters, +81% on a year earlier. Free cash flow fell 38% to $126bn, or $35bn after stock pay.
Capex against free cash flow, five hyperscalers combined
$bn, trailing twelve months
Free cash flow = operating cash flow − capital expenditure. FCF after SBC also deducts stock-based compensation.
Capex as a share of operating cash flow
TTM to 2026 Q2, by company
What it means · inference
- Capex absorbs 82% of operating cash flow, from 61%
- Less cash left for buybacks and dividends
- Returns on the build-out will take years to show
For investors · general, not personal financial advice
- Judge them on returns from capex, not revenue alone
- Rising depreciation will weigh on future reported margins
- AI suppliers depend on this spending continuing
What would change it
- Capex growth slowing below operating cash flow growth
- Disclosed AI revenue outgrowing depreciation of new assets
Method
- What is measured: Trailing-twelve-month operating cash flow, capital expenditure, free cash flow and free cash flow after stock-based compensation, summed across MSFT, AMZN, GOOGL, META, ORCL, quarterly since 2015 (latest 2026 Q2, calendar-aligned).
- Quarterly cash-flow statement items as reported (operating cash flow, capital expenditure, stock-based compensation), summed over four quarters per company, then across companies.
- Capex is the vendor capital-expenditure line (cash purchases of property and equipment); equipment obtained under finance leases is not a cash capex outflow and is not included.
- Fiscal quarters are calendar-aligned on their period-end date (Microsoft and Oracle have non-calendar fiscal years).
Sources
- MCH research warehouse, quarterly statements (Alpha Vantage, as restated).
Universe
| Names in the published feed | 886 |
| Excluded: held, suspended, withdrawn, deferred, deal-pending or pending review | 58 |
| Reader-safe universe | 828 |
| Used in this exhibit | 5 |
Names whose rating is held, suspended, withdrawn, deferred or under a pending deal are excluded from every exhibit, so no held output appears here.
General and impersonal investment research. Not personal financial advice. Forecasts, valuations and model outputs are estimates and may be wrong. See Investment Disclaimer.
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