Big Tech FCF falls to 2014 low as AI spending soars
Morgan Stanley forecasts nearly $805 billion in hyperscaler AI spending for 2026 as Amazon, Alphabet, Meta and Microsoft face their weakest combined annual free cash flow since 2014.
Amazon, Alphabet, Meta and Microsoft are set to record their weakest combined full-year free cash flow since 2014 as heavy investment in artificial intelligence infrastructure reduces available cash. Morgan Stanley now projects roughly $805 billion in hyperscaler AI spending for 2026 and about $1.1 trillion for 2027. The bank’s forecast covers major cloud and AI firms including Amazon, Alphabet, Meta, Microsoft and Oracle. Morgan Stanley adds that 2026 spending alone would be roughly equal to what all non-tech companies in the S&P 500 spent on capital the prior year.
Wall Street models compiled by Visible Alpha show the four companies’ combined free cash flow could fall to about $4 billion in the third quarter, down from a roughly $45 billion quarterly average since the COVID-19 pandemic. On an annual basis, analysts expect their aggregate free cash flow to be the lowest since 2014, when those firms’ combined revenues were about one-seventh of today’s levels.
Visible Alpha estimates Amazon will burn about $10 billion in cash this year. The company has announced plans to invest about $200 billion in 2026, the largest capital commitment among the peers named.
Meta has issued about $55 billion in bonds over the past six months and has suspended share buybacks. Analysts project the company will be cash-negative in the second half of the year.
Alphabet is still forecast to remain free cash flow positive for the full year, though at its weakest level in more than a decade. The company did not repurchase shares in the first quarter, a pause not seen since it began its buyback program in 2015.
Analysts say firms are shifting from funding AI infrastructure out of operating income to other sources. Potential options include additional borrowing, staff reductions and smaller shareholder returns.
Some analysts expect AI-related revenue and services to start contributing more to sales and cash flow over the medium term, which could help offset large up-front spending on data centers, chips and specialized software.
Free cash flow is the cash a company has left after paying operating costs and capital expenditures. Investors use it to evaluate a company’s ability to invest, pay down debt or return cash to shareholders.
