Alphabet spent $51.4bn on property and equipment in the third quarter, its results showed on 28 October, and had negative free cash flow of $9.1bn, though its trailing twelve-month free cash flow was still positive at $19.7bn. Microsoft reported the same day. Its capital expenditure, which includes finance leases but not operating leases, was $45.2bn, against $39.4bn of cash paid for property and equipment. Amy Hood, its chief financial officer, said calendar-2026 spending “should be approximately $170 billion” because some third-party capacity deliveries were delayed.
On 29 October Amazon’s results showed $77.3bn of purchases of property and equipment in the quarter, or $75.9bn net of proceeds from sales and incentives, and the company said it still expects about $220bn of cash capital expenditure for 2026. Meta, launching an equity raise on 26 October, said it expects $135bn to $145bn of capital expenditure this year.
Funding moves to outside capital
The quarter’s clearest message concerns funding. Alphabet raised $28.7bn from senior unsecured notes, sold $4.3bn of Class A and $8.1bn of Class C shares through an at-the-market programme and, unlike a year earlier, bought back no stock. Its long-term debt stood at $125.1bn at the end of September. Amazon’s free cash flow over the past twelve months was an outflow of $42.4bn, driven by a $94.8bn year-on-year increase in net purchases of property and equipment that the company says primarily reflects investments in artificial intelligence.
Microsoft still produces cash, with free cash flow of $18.6bn in the quarter, but it is leaning on landlords. Its quarterly filing shows $364.6bn of leases, “primarily for datacenters”, that had not yet commenced by 30 September. In July Hood said a longer estimated useful life for data centres and office buildings, 25 years instead of 15, would shift more future data-centre leases from finance to operating leases, CFO Dive reported. The filing shows the shift: right-of-use assets taken on through operating leases were $6,523m in the quarter, against $1,417m a year earlier, while those taken on through finance leases fell to $5,192m from $9,147m. Together the two rose only about 11%, to $11.7bn from $10.6bn, so most of the swing is classification. On 28 October Hood told analysts: “There’s a form of financing called leasing, and we’ve been using that one as a vehicle.”
What it means for owners of the whole market
For a pension or sovereign fund that holds the index, these companies are not one position but several. The same balance sheets stand behind its equity holdings, its long-dated corporate bonds and, through leases, the market for data-centre property. The Bank for International Settlements said on 27 October that hyperscaler bonds of ten years or more made up about 24% of corporate issuance at those maturities in 2026.
The funding shift changes the arithmetic in two ways. Share sales in place of buybacks mean passive funds absorb new stock instead of receiving cash. Leasing in place of ownership moves part of the cycle’s risk from shareholders to landlords and their lenders, and makes reported capital expenditure a less complete guide to what has been committed. Owners comparing capital intensity need to add lease commitments back in, and to aggregate exposure to each company across equity, credit and real-asset mandates.
The case for the spending
The counterargument rests on contracted demand. Microsoft’s commercial remaining performance obligation rose 73% to $677bn. Amazon says AWS sales rose 39% to $46.0bn, its fastest growth in nearly five years, and its release quotes Andy Jassy on “projected revenue growth rates of over 40% both in 2027 and in 2028”. The figures do not show how concentrated the customers are, or whether returns will clear a cost of capital that now includes dilution and long lease tails.
What to watch
- Microsoft’s October to December quarter, for which Hood guided capital expenditure of “over $50 billion”.
- Amazon’s fourth-quarter results, for whether 2026 cash capital expenditure lands near the company’s estimate of about $220bn.
- Alphabet’s fourth-quarter results, for whether it keeps issuing notes and shares rather than buying back stock.
- Meta’s Class C stock, effective from 19 January 2027 under its new charter; Meta plans an at-the-market programme of about $60bn once it trades.
Sources
- Alphabet Announces Third Quarter 2026 Results, Alphabet Inc. (SEC Form 8-K, Exhibit 99.1), 28 October 2026
- Microsoft Announces First Quarter Results, Microsoft Corp. (SEC Form 8-K, Exhibit 99.1), 28 October 2026
- Microsoft Fiscal Year 2027 First Quarter Earnings Conference Call, Microsoft Corp., 28 October 2026
- Form 10-Q for the quarter ended September 30, 2026, Microsoft Corp. (SEC), 28 October 2026
- Microsoft holds the line on AI spending plans, CFO Dive, 30 July 2026
- Amazon.com Announces Third Quarter Results, Amazon.com, Inc., 29 October 2026
- Meta Announces Launch of Offering of Depositary Shares Representing Series A Mandatory Convertible Preferred Stock and Offering of Class A Common Stock in Connection with Forward Sale Agreements, Meta Platforms, Inc. (SEC free writing prospectus), 26 October 2026
- Preliminary Information Statement (Schedule 14C), Meta Platforms, Inc. (SEC), 21 October 2026
- Building AI on credit: structures and spillovers (BIS Bulletin No 140), Bank for International Settlements, 27 October 2026