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What I Learned about Hyperscalers’ AI Spend
The four biggest hyperscalers reported earnings this week. Microsoft, Meta, Amazon, and Alphabet collectively told investors they will spend roughly $700 billion on capital expenditures in 2026. That is nearly double what they spent in 2025. Three of the four raised capex guidance during this week of reporting. Only Amazon held its number, and only because it had already published a $200 billion forecast in February 2026. Some of the bump in capex is coming from rising component prices. Microsoft said roughly $25 billion of its $190 billion 2026 capex is component price inflation.
The rest of us measure inflation by what gas costs at the pump. The hyperscalers measure it in billions of dollars of chip and component price increases.
Psst. Did you know that the visible capex line tells a partial story?
There is a reason no one wants to talk about forward commitments, or about lease obligations that have been signed but sit off the balance sheet. Or about the circular economy now running through these books. After all, you have to spend money to make money.
Three of the four hyperscalers recorded large non-cash gains this quarter from their stakes in AI labs. Alphabet booked $36.8 billion of equity gains, mostly the markup on Anthropic. Amazon booked $16.8 billion in pre-tax gains on Anthropic. Microsoft recognized $5.9 billion in OpenAI-related gains over nine months.
Still, no one can deny their spending is very real. And scary, at least in mere mortal terms. That is the picture from this week.
The new commitments
| Company | 2025 actual | 2026 prior guide | 2026 new guide | Change | YoY growth (mid) |
|---|---|---|---|---|---|
| Meta | $72B | $115-135B | $125-145B | +$10B both ends | +85% |
| Microsoft | ~$118B | ~$155B (consensus) | ~$190B | +$35B vs Street | +61% |
| Alphabet | $91B | $175-185B | $180-190B | +$5B both ends | +102% |
| Amazon | $88B (TTM) | ~$200B | ~$200B | unchanged | +60% |
| Combined | ~$370B | ~$660B | ~$705B (mid) | +$45B | +90% |
The reasons given for the bumps:
- Meta blamed component pricing and additional data center costs for future capacity.
- Microsoft attributed roughly $25 billion of its 2026 capex to component pricing.
- Alphabet attributed its raise to the Intersect data center acquisition, which closed in March. Sundar Pichai said Google is compute-constrained in the near term.
- Amazon’s $200 billion spend includes Amazon Leo, the satellite business previously called Project Kuiper, and the Globalstar acquisition closing.
The quarter-over-quarter trajectory
All the hyperscalers are singing the same tune. Capex roughly doubled in twelve months. Meta went from $13 billion of capex in Q1 2025 to $20 billion in Q1 2026. Alphabet went from $17 billion to $36 billion. Microsoft went from $17 billion to $31 billion in cash capex for its fiscal third quarter. Amazon went from roughly $25 billion to $44 billion.
GPUs and CPUs are short-lived assets, and that matters more than the headlines suggest. Two thirds of Microsoft’s capex this quarter went to short-lived assets, primarily GPUs and CPUs. The rest went to long-lived assets that depreciate over fifteen years or more.
When two thirds of your capex depreciates over three to five years, the depreciation expense ramps up fast and the operating margin pressure shows up almost immediately. The Nvidia gear Microsoft buys today will be obsolete by the time Microsoft has finished depreciating it. The data center shells around it will outlast it by a decade.
Telecom carriers in 1999 and 2000 were laying fiber with twenty to thirty year useful lives. The hyperscalers in 2026 are buying compute that depreciates faster than office furniture.
It also explains why Microsoft has been making its own chips, networking gear, and hardware. Vertical integration is the only way to keep depreciation pressure from eating the operating margin.
The cost is real
| Company | Q1 OCF | Q1 capex | Q1 FCF | YoY change in FCF |
|---|---|---|---|---|
| Meta | $32B | $20B | $12B | +20% |
| Microsoft (Q3 FY26) | $47B | $31B | $16B | -22% |
| Alphabet | $46B | $36B | $10B | -38% |
| Amazon (TTM) | $148B | $147B | $1B | -95% |
Amazon’s trailing twelve month free cash flow has collapsed from $26 billion a year ago to $1.2 billion now. Microsoft’s free cash flow is down 22 percent. Alphabet’s is down 38 percent. Meta is the only one of the four still growing free cash flow, and even Meta is now in the position of having $12 billion of free cash flow against $145 billion of planned capex.
Satya Nadella told investors this week that we are at the beginning of one of the most consequential platform shifts in tech history, as workloads move from being driven by end users to being driven by end users and agents. He may well be right. The shift is real. It is also a game of high-stakes poker, regardless of how confident the player feels about the cards.
Reading the tea leaves. (Sorry, footnotes!)
Press releases are just that. Press releases. You can learn a lot more from the 10-Q footnotes. That is where I found the interesting data about commitments. Commitments describe what the company has already promised to spend, not just what it expects to spend.
Moody’s reported in February that hyperscalers have roughly $662 billion in data center lease commitments that have been signed but not yet commenced. Those commitments are off-balance-sheet, and the total is greater than the total on-balance-sheet debt of the same companies. The accounting rule that allows this disclosure delay is GAAP’s lease commencement standard. It still does not mask the economic reality.
Meta’s contractual commitments rose by $107 billion in a single quarter. The previous balance, at September 30, 2025, was $81 billion. The implied total at March 31, 2026 is somewhere around $190 billion. Meta committed to almost five years’ worth of pre-2024 capex in ninety days.
Alphabet disclosed $232.7 billion of non-cancelable commitments for supply, content, and energy as of March 31, 2026. The 10-Q also disclosed $40.7 billion of future funding commitments to variable interest entities. Buried inside that figure is a $30 billion equity derivative. That is an off-balance-sheet commitment used to fund what looks like an AI infrastructure SPV. The same 10-Q discloses $24.1 billion of capex sitting in accrued liabilities and accounts payable, twice the prior year figure. That is capex Alphabet has incurred but has not yet paid in cash. Working capital is being stretched.
Microsoft’s 10-Q discloses two unusual items. The first is $17.8 billion of receivables related to activities to facilitate the purchase of server components, up from $8.2 billion at the start of the fiscal year. The second is $11.5 billion of restricted investments pursuant to a single supplier agreement. The $29 billion is Microsoft pre-funding the supply chain to lock in inventory.
Alphabet disclosed a backlog of $467.6 billion as of March 31, 2026. The vast majority is Google Cloud. Roughly 55 percent is expected to convert to revenue over the next twenty-four months. Who are the customers? Hard to say, but Anthropic is almost certainly one of them.
The Bottom Line
The headline says hyperscaler capex is roughly doubling. The platform shift to a new tech stack is real. AI revenue is growing fast. None of that is wrong.
What is also true is that funding is increasingly off the balance sheet, that supplier relationships are being prepaid, that lease commitments are being deferred for as long as accounting rules allow, and that a meaningful portion of the AI revenue and AI investment gains are flowing in a circle through the same small set of AI labs.
The platform shift is real. AI engineering is real. So is the financial engineering.
Let the good times roll.
April 30, 2026.