Microsoft, Alphabet, Meta and Amazon spent a combined $208.7 billion on capital expenditure in the July–September quarter, according to their third-quarter 2026 reports, and investors rewarded only the company whose cash flow still covered the bill. Alphabet shares fell 12.64% on Thursday 29 October after its free cash flow turned negative at $9.07 billion, while Microsoft closed almost flat the same day after Azure revenue grew 48%, according to the company releases and StockAnalysis closing data.
Financial analyst Ruslan Averin reads the four reports as the first real stress test of the AI build-out: AI revenue is large and growing, but at three of the four companies operating cash flow no longer pays for the data centres.
The scorecard: capex, guidance, cloud growth and the stock reaction
| Company | Q3 capex | Capex guidance | Cloud growth | Stock on report day |
|---|---|---|---|---|
| Microsoft | $45.2 billion incl. finance leases ($39.4 billion cash) | Above $50 billion in Oct–Dec; about $170 billion in calendar 2027 | Azure +48% | −0.16% (29 Oct) |
| Alphabet | $51.4 billion | $195–205 billion in 2026; "increase significantly" in 2027 | Google Cloud +103% | −12.64% (29 Oct) |
| Meta | $34.9 billion incl. finance-lease principal | $135–145 billion in 2026 | no cloud unit | −6.98% (22 Oct) |
| Amazon | $77.3 billion | About $220 billion in 2026; "meaningfully more" in 2027 | AWS +39% | −1.41% (30 Oct) |
Sources: company filings; call guidance via CNBC; closes from StockAnalysis.
Microsoft: the one the market forgave
Microsoft reported on Wednesday 28 October: revenue rose 19% to $92.28 billion against $90.69 billion expected by LSEG, and adjusted EPS was $4.89 against $4.73, CNBC reported. Azure revenue was $33.17 billion, up 48%, above the $32.32 billion StreetAccount consensus.
Operating cash flow was $58.0 billion and cash spending on property and equipment $39.4 billion, leaving free cash flow of $18.6 billion. Including finance leases, capex was $45.2 billion, below the $50.67 billion StreetAccount expected. CFO Amy Hood guided above $50 billion for the December quarter and about $170 billion for calendar 2027, blaming delays at third-party GPU providers, CNBC reported. "We still have demand that exceeds supply," she said.
Shares rose 4% after hours but closed on Thursday 29 October at $530.14, against $531.01 before the report.
Alphabet: Google Cloud doubled, the stock lost 12.6%
Alphabet's revenue rose 25% to $127.58 billion on Wednesday 28 October, just below the $128.22 billion LSEG consensus, and CNBC put adjusted EPS at $2.67 against $3.02 expected. Google Cloud revenue rose 103% to $30.7 billion, with operating income of $11.1 billion against $3.6 billion a year earlier.
But operating cash flow was $42.3 billion and capex $51.4 billion, so free cash flow was −$9.07 billion. CFO Anat Ashkenazi kept the 2026 range at $195–205 billion and said: "We continue to expect our capex to increase significantly in 2027." The stock closed at $283.82 on Thursday 29 October, down 12.64% from $324.89.
Meta: no cloud revenue, negative cash flow, new equity
Meta reported on Wednesday 21 October: revenue of $64.60 billion, up 26%, beat the $63.37 billion LSEG consensus. Capex including finance-lease principal was $34.91 billion against operating cash flow of $32.79 billion, so free cash flow was −$2.12 billion. The stock fell 6.98% to $648.85 on Thursday 22 October, and lost 15% in October, its worst month in four years, CNBC reported.
On Friday 30 October S&P Global revised Meta's outlook to negative from stable and kept the AA- rating, questioning "Meta's ability to monetize its AI investments", according to CNBC.
Amazon: AWS at 39%, cash outflow of $42.4 billion
Amazon reported on Thursday 29 October: EPS of $1.89 missed LSEG's $1.96, while AWS revenue rose 39% to $45.98 billion, the fastest since 2021, CNBC reported. Capex was $77.3 billion in the quarter against $42.4 billion of operating cash flow, and trailing twelve-month free cash flow was an outflow of $42.4 billion, the release shows. The stock closed at $240.35 on Friday 30 October, down 1.41% (my Amazon Q3 review).
The stress test: three ratios
1. Capex against operating cash flow. In the third quarter Microsoft spent 68% of its operating cash flow on cash capex, Meta 106%, Alphabet 121% and Amazon 182%, by my calculation from the cash flow statements. Together the four spent $202.9 billion of cash capex against $175.5 billion of operating cash flow, or 116%.
2. Depreciation that is still to come. Combined depreciation and amortisation was $48.2 billion in the quarter, up 36% from a year earlier: Alphabet +49%, Microsoft and Meta +44%, Amazon +25%. Capex runs at 4.2 times that charge. Servers bought now hit the income statement over several years, so margins face a rising cost even if spending stops growing.
3. AI revenue the companies actually disclose. Azure, Google Cloud and AWS are real, fast-growing lines, and backlog is larger still: $677 billion of commercial obligations at Microsoft, $560.8 billion at Google Cloud and about $578 billion at AWS. Meta has no such line; its AI pays off through ad prices, which rose 14%.
In my view the test is whether AI revenue arrives faster than depreciation. Microsoft passes for now; Alphabet and Amazon have backlog but negative cash flow meanwhile; Meta has neither a cloud business nor positive free cash flow, which is why its credit outlook moved first.
Who pays for it: bonds, preferred stock and share sales
The gap is financed in the capital markets, the same channel that made CoreWeave's $51 billion of debt a worry in October.
- Microsoft priced $25 billion of notes in ten tranches on Thursday 29 October, with coupons from 4.85% to 6.35% and maturities from 2028 to 2066, lifting total debt to $60.4 billion from $35.5 billion, its prospectus shows.
- Alphabet raised $28.7 billion of senior notes in the third quarter and sold $12.4 billion of stock through its at-the-market programme. Long-term debt reached $125.1 billion at 30 September from $46.5 billion at the end of 2025, its filings show; a euro bond followed on Monday 2 November.
- Meta sold $12.5 billion of 6.50% mandatory convertible preferred stock and agreed forward sales of 40 million shares at $625, about $25 billion, its filings of 26–29 October show.
- Amazon took in $48.1 billion of long-term debt in the third quarter alone, its cash flow statement shows.
Apple: a different kind of test
Apple reports fiscal fourth-quarter results after the US close on Monday 2 November. Analysts polled by LSEG expect revenue of $113.39 billion, according to LSEG data cited by Reuters; the stock closed on Friday 30 October at $344.63. Its test is memory costs and the December-quarter guide, not data-centre capex (my Apple preview).
What decides the next move
My base case: spending keeps rising in 2027 and investors keep sorting companies by cash coverage, as in the Nasdaq's worst week of October and after Intel's guidance shock. The bull case needs cloud growth above 40% as depreciation rises; the bear case is backlog that grows while revenue growth slows.
Ruslan Averin made the same point in a column for vidverto-news.com.ua on 2 November: the market is ready to punish companies when spending grows faster than the financial return. For the longer background, see Azure's path to $100 billion.
Ruslan Averin's columns on this topic
The author's column on the Big Tech reports:
- Big Tech reports under the microscope: Ruslan Averin on stress-testing AI investments — vidverto-news.com.ua, 2 November (in Russian)
What to watch next
- Monday 2 November, after the US close: Apple's fiscal Q4 2026 results and December-quarter guide.
- Wednesday 4 November: settlement of Microsoft's $25 billion bond.
- Tuesday 19 January 2027: Meta's restated charter takes effect, starting the Class C share dividend.
- Late January – early February 2027: fourth-quarter reports; Alphabet has promised 2027 capex details on its Q4 call.
Related: the AI capex and revenue gap, Amazon's Q3 2026 results and Meta's Q3 2026 results.