The spending trajectory itself is accelerating sharply, up around 75% year-on-year. Compared to roughly three quarters ago, when capex estimates stood near $650 billion, the latest figures represent an increase of nearly 10%, highlighting how quickly AI infrastructure build-outs are being scaled up across the industry.
Microsoft has been among the biggest contributors to the upward revisions. Its annualized capital expenditure has increased from around $150 billion three quarters ago to approximately $190 billion now, a jump of about $45 billion. Microsoft CFO Amy Hood has said roughly $25 billion of this increase is linked to higher memory and component costs. However, she also pointed to strong underlying demand as a key driver of the increase.
Google emerged as a standout performer in the latest earnings cycle, with its share price rising nearly 7% in after-hours trading. Google Cloud surpassed $20 billion in revenue for the first time, recording 63% year-on-year growth. The company’s order backlog is also doubling, signaling sustained demand strength.
Alphabet CEO Sundar Pichai said cloud revenue would have been even higher if the business was not currently constrained by compute capacity. He also indicated that capital expenditure in 2027 is expected to be significantly higher, reinforcing the company’s aggressive investment trajectory in AI infrastructure.
In terms of growth, Google Cloud is outperforming key competitors. While Amazon Web Services continues to lead in absolute revenue terms, Google Cloud’s 63% growth rate is roughly double that of AWS and higher than Microsoft Azure, positioning it as the fastest-growing major cloud provider.
However, the scale of investment is beginning to weigh on cash generation. Companies that once produced strong operating cash flows are now deploying a large portion of it toward capital expenditure, resulting in a noticeable decline in free cash flow across the sector.
Alphabet has seen a sharp fall, Meta Platforms is down about 10%, and Microsoft’s free cash flow has declined around 22%. Amazon’s figures appear more severe due to differences in reporting methodology, as it uses trailing twelve-month data rather than quarterly snapshots, but the broader trend remains consistent across Big Tech.
Despite this, management teams remain confident about returns on investment. AWS chief Andy Jassy said the company already has customer commitments for a significant portion of its investments and expects “compelling” operating margins and returns over time.
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Meta CEO Mark Zuckerberg, meanwhile, said the company does not have a fixed roadmap for how all AI products will scale. However, he emphasized that Meta has a clear strategic direction and remains confident that its Superintelligence Lab will evolve into one of the world’s leading AI research centres.
Overall, while capital expenditure continues to surge quarter after quarter, the industry still faces key questions around how these investments will translate into long-term returns and how they will be sustainably funded.
