TL;DR
- Capex is outrunning cash: Q3 capex was 182% of operating cash flow at Amazon, 121% at Alphabet and 106% at Meta. Free cash flow was negative at four of the six companies, and none expects to spend less in 2027
- Debt is filling the gap: the group has sold about $284bn of bonds this year, more than the previous six years combined. Alphabet, Meta and Microsoft all sold bonds within days of reporting, and hyperscaler option-adjusted spreads across maturities have widened to about 156bps from 96bps at the start of the year, according to Citi
- AI demand is real, but returns lag: cloud revenue and margins are climbing, yet each extra dollar of capex is bringing in only 52–92 cents of extra revenue, while depreciation grows faster than profit at most of the group
- Commitments outlast the contracts: cloud backlogs of more than $500bn each mostly turn into revenue within two to three years. Data-centre leases and supply deals run for decades, and part of that backlog depends on cash-burning AI labs such as Anthropic and OpenAI
Big tech’s (Alphabet, Amazon, Meta, Microsoft, SpaceX, Tesla) third-quarter resultsshowed demand for AI is real and growing....
