Free Cash Flow Is Now the Scorecard for AI Spenders: What the Evidence Says

Wall Street’s story about Big Tech’s AI spending has a new scorecard. The question is no longer how much a company will spend on data centers, but how much cash is left after it does. Jeremy Saltsburg, senior investment officer at Check Capital, put it plainly to Reuters this week: negative free cash flow changes how the market will read the next spending plan.

On Wednesday, Alphabet (GOOGL) said its free cash flow, the cash left after paying for data centers and equipment, was negative $9.07 billion in the third quarter, its second negative quarter in a row. On Thursday its shares had their worst day since Google’s 2004 listing. A week earlier Meta (META) slid on its first cash burn in more than a decade, while Oracle (ORCL) soared on Wednesday after promising to cap how much new money it raises.

The story in one sentence

“A $300-billion (capex) number could potentially scare the market because free cash flow now is finally negative.” Jeremy Saltsburg, senior investment officer at Check Capital, told Reuters on Wednesday 28 October, on what Alphabet might spend in 2027.

The chain runs like this. If spending grows faster than the cash a business brings in, the gap has to be filled with borrowing or new shares. Borrowing is dearer with the 10-year Treasury yield near 5%, and new shares shrink each owner’s slice of future profit, so investors now pay for a spending plan only when they can see the cash that will cover it.

The evidence for it

1. Four of the five biggest spenders burned cash last quarter

By our count from their quarterly filings, cash from operations fell short of spending on property and equipment at Alphabet, Amazon (AMZN), Meta and Oracle in their latest quarters. Microsoft (MSFT) was the exception, with $18.6 billion left over from July to September.

The measures differ, and the basis matters. Meta’s own figure, which also subtracts principal payments on finance leases (long-term rentals it books like debt), was negative $2.12 billion, its first cash burn in more than a decade, Reuters and investingLive reported.

Amazon reports a 12-month figure. Free cash flow was an outflow of $42.4 billion in the year to September, against an inflow of $14.8 billion a year earlier, its results release showed.

2. Alphabet and Meta fell furthest after reporting cash burn

Since Meta reported on 21 October, Alphabet has fallen 16.4%, the most of the five, by our price files. Oracle is the only one higher.

Alphabet’s burn was a surprise. Analysts had expected free cash flow close to break-even, according to LSEG data cited by Reuters. Its first negative quarter, in the spring, was the first in its 22 years as a public company, Reuters noted.

3. This quarter, the big budget raises stopped

Earlier this year the plans kept rising. In July, Amazon lifted its 2026 plan to about $220 billion from about $200 billion, “owing to higher memory costs,” Fortune reported, and Meta had raised its range in April, CNBC reported.

This quarter the big raises stopped. Alphabet held its range rather than raising it, and Microsoft said on its call that calendar-2026 spending “should be approximately $170 billion due to the 3P capacity delays,” meaning late deliveries from outside suppliers. Meta only lifted the bottom of its range, and Amazon kept its plan.

CNBC’s headline read: “AI buildout hits snag as Google and Microsoft put off raising capex forecasts.” None of that means less spending next year: Wall Street still expects more than $1 trillion in 2027.

4. Lenders are charging more for the risk

The cost of insuring Meta’s debt against default hit a record after its results, Reuters and CNBC reported. Further out, bonds of CoreWeave (CRWV), which rents out AI computing power, yielded close to 15% in mid-October, investingLive and Admiral Markets reported. Our analysis of the debt behind the build-out has the detail.

Goldman Sachs strategists made the same point in their September forecast: the companies’ spending now exceeds the cash their operations generate, which means more borrowing, Briefs and The Decoder reported. Oracle’s shares jumped on a promise to limit exactly that: no more than $20 billion of new debt and shares over four fiscal years.

The case against it

Not everyone buys the shift. “I don’t think this is a broader reset,” Art Hogan, chief market strategist at B. Riley Wealth, told Reuters on Friday, calling the selloff “more of a rotation out of an extremely popular technology trade.” Park Jun-young of Hanwha Investment & Securities told the Korea JoongAng Daily on Thursday that “major hyperscalers have room to keep investing, backed by a solid operating cash flow.”

1. Investors also punish spending too little. Microsoft spent about $5.5 billion less than analysts expected last quarter, and its 4% after-hours gain was gone by Thursday’s close. Chief Financial Officer Amy Hood blamed late outside capacity, and less capacity now can mean less cloud revenue later.
2. Fast growth still outweighs cash burn. Amazon burned the most cash of the five over the past year, yet its shares fell just 1.4% on Friday after it projected growth of more than 40% at AWS, its cloud arm, in both 2027 and 2028.
3. The cash machines are still growing. Amazon’s operating cash flow rose 29% over 12 months, and Alphabet’s 12-month free cash flow is still positive at $19.7 billion, their releases show. And Friday’s selling hit nearly everything: Oracle gave back its whole investor-day jump, which fits Hogan’s rotation better than a verdict on its funding plan.

The first is the strongest. A market that marks a company down for spending too little is not yet grading on cash alone.

What would change minds

• Apple (AAPL) reports on Monday 2 November at 4:30 p.m. ET. It spent $10.0 billion on property and equipment in the 12 months to June; Microsoft spent $135.9 billion in the 12 months to September, by our count from filings. Apple is the best Magnificent Seven stock this year, by our price files. Another rally on a light-spending, cash-rich report would back the story.
• Nvidia (NVDA) reports on Tuesday 17 November, with its call at 5 p.m. ET. If its forecast shows the big spenders still raising orders and its shares rise on it, “spend more” is still being rewarded.
• Microsoft’s promise is the threshold. Hood guided to more than $50 billion of capital spending this quarter and said Microsoft expects “to continue to remain free cash flow positive” in the fiscal year to June 2027. If that slips, the last cash-positive spender joins the others.

The stocks exposed

Most exposed if the story holds:

Most exposed if it breaks:

Our read

Partly supported. The filings are clear: four of the five biggest spenders burned cash last quarter, and Alphabet and Meta, whose quarterly cash flow turned negative this year, were punished hardest. The weak link is Microsoft: the same investors marked it down for spending too little, so the scorecard is cash and growth together, not cash alone. The number we’ll watch is Amazon’s 12-month free cash flow, now negative $42.4 billion; if it deepens again while AWS keeps speeding up, we’ll learn which of the two investors care about more.