Amazon, Alphabet and Microsoft plan to spend a combined $585 billion to $595 billion on capital expenditures in 2026, much of it to build artificial intelligence infrastructure, as their latest earnings expose the growing cash-flow cost of the AI boom.
Amazon reported today that AWS revenue rose 39% to $46 billion in the third quarter, its fastest growth in nearly five years. But free cash flow for the 12 months ended Sept. 30 was negative $42.4 billion, compared with positive $14.8 billion a year earlier. Amazon attributed the deterioration primarily to higher purchases of property and equipment, largely reflecting AI investments.
The company maintained its forecast of approximately $220 billion in cash capital expenditures for 2026. Overall third-quarter sales rose 12% to $201.9 billion, while operating income climbed to $28.1 billion from $17.4 billion. Net income fell to $20.7 billion, partly reflecting investment gains recorded a year earlier. Amazon also forecast fourth-quarter revenue of $240 billion to $247 billion.
Alphabet, meanwhile, expects $195 billion to $205 billion in capital expenditures this year. It reported $51.4 billion in third-quarter capital spending and negative quarterly free cash flow of $9.1 billion, even as Google Cloud revenue more than doubled to $30.7 billion. It is the company’s second consecutive quarterly negative cash flow – Q2 was the first time it went negative in its history. Alphabet’s overall revenue rose 25% to $127.6 billion, but missed analysts’ estimates.
Microsoft plans about $170 billion in capital expenditures in calendar year 2026. Its quarterly capital spending reached $45.2 billion, while free cash flow remained positive at $18.6 billion. Azure cloud revenue increased 48% to $33.2 billion.
Shares of Amazon are down 6.7% in after-hours trading; the company reported earnings after the market’s close today. Alphabet shed 12.3% to $282.32 during the trading day; it reported earnings yesterday after the market’s close. Microsoft was down about 1% to $530.14. It also reported earnings yesterday after the market close.
Last week, Meta reported heavy investment and negative quarterly free cash flow. Its third-quarter capital expenditures, including finance lease payments, were approximately $34.9 billion, while free cash flow was negative about $2.1 billion.
The results show that strong cloud growth does not automatically produce cash returns after infrastructure spending. AWS and Google Cloud are expanding rapidly and generating operating profit, but the companies’ overall cash spending has put cash flow in the red. Microsoft, by contrast, remains free-cash-flow positive despite its accelerating investment.