The four largest US technology companies are on course to spend close to $700bn on artificial intelligence infrastructure this year, and the cost is starting to show up in the one figure that is hard to dress up: free cash flow.
An analysis by Reuters, found that combined capital spending across the major cloud operators is set to overtake the cash their core businesses generate.
Wall Street’s consensus for this year’s AI capex has climbed from roughly $485bn in January to about $730bn by July, on the figures Reuters compiled.
The sharpest early warning came from Amazon, whose free cash flow fell to $1.2bn on a trailing 12-month basis in the first quarter, down from about $26bn a year earlier, even as operating cash flow rose 30% to $148.5bn.
The mechanics are straightforward. Capital spending is growing far faster than the money coming in.
Epoch AI estimates that hyperscaler capex is expanding at roughly 70% a year while operating cash flow grows about 23%, which puts aggregate spending on track to overtake operating cash flow around the third quarter of 2026.
Reuters put the gap in blunt terms. Between 2025 and 2027, capital expenditure across Microsoft, Alphabet, Amazon, Meta, and Oracle is expected to rise by about $534bn, against a roughly $340bn increase in operating cash flow.
That works out at $1.57 of capex for every additional dollar of cash the businesses generate.
Not every company is under the same strain. Microsoft reported $37.5bn of capital spending, including finance leases, in its fiscal second quarter, against $35.8bn of operating cash flow, and has guided towards roughly $190bn for the year.
Alphabet and Meta are still producing enough cash to cover dividends and buybacks, at least for now.
The guidance keeps climbing regardless. Meta has said it will spend up to $145bn this year, and Alphabet has reset its own bar higher for a second consecutive quarter.
Asked about the return on all that outlay, Meta chief executive Mark Zuckerberg told analysts in April that it was “a very technical question,” which is roughly the answer the market has been given across the sector.
Oracle is furthest down the road. Its capex reached 174% of operating cash flow in fiscal 2026, up from 47% four years earlier, and its free cash flow has turned negative.
The company’s credit rating sits one notch above junk, and it has signalled plans to raise between $45bn and $50bn to keep building.
That points to the wider shift. Most of the hyperscalers have already turned to external financing, whether cash reserves, bond issuance, or equity, to fund the build-out rather than pay for it out of operations.
Amazon, Alphabet, and Meta have all tapped the bond markets in recent months, at a scale that has begun to reshape corporate debt issuance on both sides of the Atlantic.
The question investors keep returning to is whether the spending pays off. “AI is pushing them toward a hybrid model where software, advertising and cloud economics increasingly depend on enormous physical infrastructure spending,” Shay Boloor of Futurum Equities told Reuters.
Others are more cautious about the timeline. David Russell of TradeStation warned that “earnings growth may not be enough to justify investment if capex is depleting cash,” while Freddy Lavric of Winthrop Capital said companies would need two to three years to show the spending translates into incremental revenue and improving margins.
For now, the accounting cushions the blow. Because capital spending is depreciated over years rather than booked upfront, all of the big spenders remain profitable, and increasingly so. Free cash flow is simply where the pressure lands first.
The next test comes with the quarterly earnings due in the coming weeks. Investors will be watching capex guidance at least as closely as revenue, and for once the two numbers may well pull in opposite directions.
