I didn’t pay much attention to revenue in the earnings reports from four Big Tech companies last Thursday. I focused on cash flow.
Google, Amazon, Meta, and Microsoft spent a combined $207 billion on capital expenditures in Q3.
A year ago, it was $113 billion.
Almost double.
All that spending is putting cash flow under pressure.
Google’s free cash flow was -$9.1 billion. Its stock fell 13% in a single day, its biggest drop since going public.
Amazon’s was -$33.5 billion. AWS was still growing at 39%, yet the stock fell 7% anyway.
Meta’s was -$2.1 billion—the first time it has burned cash since 2012.
Only Microsoft was in the black, at +$18.6 billion.
Azure grew 48%, and the stock barely moved.
The four companies lost nearly $900 billion in combined market value.
I think the market’s standards have changed.
In the past, just saying you were investing in AI was enough to make your stock go up.
Now you have to prove that the investment can pay for itself.
There was another detail from Microsoft.
It said it hadn’t spent all of its capital expenditure budget because deliveries of third-party GPUs were delayed.
As soon as that came out, compute-rental stocks like CoreWeave, Nebius, and IREN fell too.
When the big players spend a little less, the companies downstream feel the pain first.
I’m an independent developer, so I’m especially sensitive to costs.
If API prices go up a little or I need one more server, I have to calculate how long it’ll take to break even.
The big companies are working with the same logic—just with a few more zeros.
The demand for AI is real. I don’t doubt that.
What I do doubt is how long it’ll take to recoup the investment.
Capital expenditure has doubled in a year. We’ll see next quarter whether revenue can keep up.
Which company do you think will be the first to slow down its capital spending?
Google, Amazon, Meta, and Microsoft spent a combined $207 billion on capital expenditures in Q3.
A year ago, it was $113 billion.
Almost double.
All that spending is putting cash flow under pressure.
Google’s free cash flow was -$9.1 billion. Its stock fell 13% in a single day, its biggest drop since going public.
Amazon’s was -$33.5 billion. AWS was still growing at 39%, yet the stock fell 7% anyway.
Meta’s was -$2.1 billion—the first time it has burned cash since 2012.
Only Microsoft was in the black, at +$18.6 billion.
Azure grew 48%, and the stock barely moved.
The four companies lost nearly $900 billion in combined market value.
I think the market’s standards have changed.
In the past, just saying you were investing in AI was enough to make your stock go up.
Now you have to prove that the investment can pay for itself.
There was another detail from Microsoft.
It said it hadn’t spent all of its capital expenditure budget because deliveries of third-party GPUs were delayed.
As soon as that came out, compute-rental stocks like CoreWeave, Nebius, and IREN fell too.
When the big players spend a little less, the companies downstream feel the pain first.
I’m an independent developer, so I’m especially sensitive to costs.
If API prices go up a little or I need one more server, I have to calculate how long it’ll take to break even.
The big companies are working with the same logic—just with a few more zeros.
The demand for AI is real. I don’t doubt that.
What I do doubt is how long it’ll take to recoup the investment.
Capital expenditure has doubled in a year. We’ll see next quarter whether revenue can keep up.
Which company do you think will be the first to slow down its capital spending?