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According to a Reuters report, Alphabet burned through $5.9 billion in cash during the second quarter despite posting record 82 percent growth in its cloud computing unit that provides AI processing capacity. The company now anticipates an extra $15 billion in spending for the remainder of 2026 with further increases slated for the following year. This shift marks one of the clearest indications of how artificial intelligence is altering financial dynamics at even the most profitable technology enterprises that once generated abundant free cash flow.
Reuters data shows that Big Tech capital expenditures are set to exceed $700 billion this year as internal cash generation falls short of requirements with the group turning to debt and share sales for funding. A Goldman Sachs assessment found the four largest hyperscalers will direct a combined $725 billion toward capital expenditures in 2026 representing a 77 percent increase from the previous year. Bank of America analysts placed Amazon at $200 billion Microsoft near $190 billion Alphabet between $175 billion and $185 billion and Meta in a $115 billion to $135 billion range for the period.
Alphabet shares declined about 6 percent in early trading on July 23 while Meta Platforms and Amazon each dropped around 3.5 percent with Microsoft shares remaining flat. Charu Chanana chief investment strategist at Saxo Markets said “The risk is tilted towards further increases particularly while Microsoft and others remain capacity-constrained.” Chanana added that investors will increasingly focus on how much of that cash must be reinvested simply to remain competitive and whether AI revenue can grow faster than capital expenditure depreciation and operating costs.
Financial projections cited by Reuters indicate Alphabet and Amazon are expected to burn cash through 2026 while Meta’s cash flow is likely to shrink 95.7 percent to just $1.85 billion. Microsoft whose current fiscal year ends next June is anticipated to generate $25.39 billion in cash less than half of the estimated $58.74 billion from the prior financial year. The capex-to-revenue ratios for the group are projected to nearly double this fiscal year with Meta reaching 54.9 percent from 35.9 percent Alphabet climbing to 41 percent from 23 percent Microsoft to 45 percent from 31 percent and Amazon to 25 percent from 18 percent.
Demand for Google Cloud has accelerated faster than at some larger rivals in recent quarters enabling the unit to capture additional market share according to the earnings details. Richard Clode portfolio manager of Janus Henderson Investors’ Global Technology Leaders said “Google Cloud was an absolute blow out. Alphabet has competitive advantage running all the way through the stack from their own custom AI chips through to distribution to billions of users.” Lale Akoner global market strategist at eToro said “As compute becomes more available and models become cheaper cloud capacity may look increasingly interchangeable. That could force providers to spend more while accepting lower returns.”
