Short answer
Capex, short for capital expenditure, is money spent on long-lasting assets such as data centres, servers and chips, rather than on day-to-day costs. Amazon, Alphabet, Microsoft and Meta together plan roughly $720 billion to $740 billion of it in 2026, and it is so large that some of them now spend more than their operations bring in.
Follow-up question Which numbers tell you whether the spending is under strain?
When a company pays its electricity bill, the cost hits its profit right away. When it buys a server that will last years, the accounting is different: the purchase is capital expenditure, and its cost is spread over the machine's useful life. Almost every debate about AI money starts with this distinction.
"Hyperscalers" is the usual name for the giant cloud and platform companies that build data centres at huge scale. Their third-quarter reports, published in the past two weeks, give a clear reading of how much they are spending.
The 2026 numbers
| Company | Expected 2026 capex | Where the figure comes from |
|---|---|---|
| Amazon | About $220 billion | Its October 29 earnings release, cash capex |
| Alphabet | $195–205 billion | Reported by CNBC from its earnings call |
| Microsoft | About $170 billion for calendar 2026, down from about $175 billion | CFO Amy Hood on the earnings call, citing delayed third-party capacity |
| Meta | $135–145 billion | Its filing; includes finance lease payments |
Adding those gives about $720 billion to $740 billion. Treat that total as approximate, because the companies define capex differently. Meta counts principal payments on finance leases, Amazon's figure is cash spending, and the other companies' periods may not line up exactly.
The direction is still up. CNBC reports expectations that the group will pass $1 trillion in 2027, and the Bank of England noted that the consensus forecast for 2028 went from under $600 billion to over $1 trillion in about seven months. Alphabet's chief financial officer told analysts to expect a significant increase next year, according to CNBC.
To feel the scale: Amazon's purchases of property and equipment reached $77.3 billion in the third quarter alone, roughly $840 million a day. Cohere has promised at least C$1.7 billion of computing infrastructure in Canada by 2030, as part of the federal investment announced in October. That whole commitment, in Canadian dollars, is less than two days of Amazon's recent pace.
Capex is not the same as a cost this year
Spreading a purchase over time is called depreciation. Here is a simple example with a $10 billion purchase of servers:
| Assumed useful life | Depreciation per year | Effect on profit |
|---|---|---|
| 6 years | $1.67 billion | Smaller yearly charge, higher profit now |
| 5 years | $2.00 billion | Middle |
| 3 years | $3.33 billion | Larger yearly charge, lower profit now |
The cash is gone on day one in every case. Only the reported profit changes. That is why the assumed life of an AI chip has become a real argument: Michael Burry, an investor, contends that chips last two to three years rather than the five or more that hyperscalers assume. Depreciation also lags spending, so it keeps climbing after capex growth slows. Alphabet's depreciation on property and equipment rose from $15.1 billion to $22.0 billion in the first nine months of the year, compared with a year earlier, while its capex more than doubled.
Free cash flow: the number investors are watching
Free cash flow is the cash left over after capex: cash from operations minus capital spending. It ignores accounting choices about depreciation, so it shows the strain directly.
| Company | Period | Operating cash | Capex | Free cash flow |
|---|---|---|---|---|
| Alphabet | Q3 2026 | $42.3B | $51.4B | −$9.1B |
| Meta | Q3 2026 | $32.8B | $34.9B | −$2.1B |
| Oracle | June–Aug 2026 | $23.1B | $28.5B | −$5.4B |
| Amazon | 12 months to Sept 2026 | $168.3B | $210.7B | −$42.4B |
| Microsoft | July–Sept 2026 | $58.0B | $39.4B | About +$18.6B |
Microsoft's row is our subtraction, using cash additions to property and equipment. It leaves out the data centres Microsoft acquires through finance leases, which is one reason company-to-company comparisons need care. Amazon's figure uses its own 12-month definition.
Negative free cash flow does not mean a company is failing. These companies remain very profitable. It does mean the buildout is no longer paid for entirely by the existing business, so money must come from elsewhere: bonds, share sales or partners. Alphabet raised about $50 billion, net, from stock and related securities in June 2026, saying the money would help fund AI infrastructure.
What capex does not show
Leases are the big blind spot. A company can secure a data centre by renting it, and a lease that has not started yet does not appear as capex and is not on the balance sheet. Each company discloses these amounts in its filings:
| Company | Leases signed but not yet started (Sept 30, 2026) |
|---|---|
| Microsoft | $364.6 billion |
| Meta | $355.7 billion |
| Amazon | $164.9 billion |
| Alphabet | $130.5 billion |
Those are future payments, spread over many years, and some Microsoft arrangements depend on conditions being met. Still, they sit outside the headline capex number, and joint ventures and other financing structures can move even more spending out of view.
Try it: Open any hyperscaler's latest quarterly report, search for "not yet commenced," and compare the figure with its annual capex.
Which numbers tell you whether the spending is under strain?
Four are worth following from quarter to quarter. Free cash flow shows whether operations still cover the buildout. New debt and share sales show how much outside money is needed. Depreciation shows how fast past spending is reaching profits. And backlog, the revenue customers have contracted but not yet paid, shows whether demand is keeping pace.
The last two weeks show why they matter. CNBC reports that Alphabet fell about 10% in after-hours trading on its negative free cash flow, while Microsoft cited delays at third-party GPU suppliers that push some capacity into 2027. So a lower spending figure can reflect delayed delivery rather than lower ambition. This explains the numbers only; it says nothing about whether any stock is a good purchase.
Sources
- Amazon.com announces third quarter results — Amazon / US SEC, October 29, 2026
- Alphabet announces third quarter 2026 results — Alphabet / US SEC, October 28, 2026
- AI buildout hits snag as Google and Microsoft hold capex forecasts — CNBC, October 29, 2026
From the Guide to Artificial Intelligence, by Robert Scales, published by Holistic Hybrid Inc. Share and adapt it under CC BY-NC-SA 4.0: credit the guide, link to https://guidetoartificialintelligence.com/en/learn/ai-capex-explained/, no commercial use without permission, and keep the same licence.