Big tech’s AI spending problem is getting bigger

TL;DR: Yesterday, Microsoft, Meta, Alphabet, and Amazon all reported strong earnings from January through March—then announced even bigger AI infrastructure budgets that push their combined 2026 capex to as much as $725 billion. Only Alphabet convinced Wall Street the bill was worth it.

What happened: All four firms beat quarterly expectations. Then, they told investors they’d spend even more than already earmarked, most of it on AI.

• Microsoft raised its capex projection to $190 billion (~$35 billion above analyst consensus).
• Meta’s range increased to $125–$145 billion (up $10 billion from its last estimate).
• Alphabet is now at $180–$190 billion (up $5 billion).
• Amazon stuck with its previous $200 billion plan but already spent a whopping $43 billion in Q1, the highest among this group by almost $7 billion.

By Thursday morning, only Alphabet shares were up—which makes sense, given Google Cloud revenue rose 63% (far above the 50.1% analyst estimate). Meta dropped ~10%; Microsoft fell ~3%, and Amazon slipped ~1%, though AWS posted its fastest growth rate in 15 quarters.

Sticker shock: These four companies’ spending in the first three months of the year hit $131 billion—over three times the inflation-adjusted cost of the Manhattan Project (and 71% higher than the same quarter last year), per the New York Times. Meta alone is now on track to spend more in 2026 than in the past two years together.

Who’s getting away with it: Company execs all offered some justification for their spending binge, whether it was the need for more compute, rising component costs, future revenue to be booked, or pitching it as a long-term infrastructure investment. But for the most part, Wall Street isn’t buying it. As one S&P Global analyst put it to Fortune, without a blowout quarter, Meta’s capex bump “raises this question about what is the real ROI.” Meta’s Reality Labs (its VR/AR division) burned another $4 billion, pushing cumulative losses past $83 billion. (Meta also lost about 20 million users this quarter.)

Microsoft’s gross margin, meanwhile, shrank to its lowest since 2022. And while AWS’s growth was impressive, Amazon’s free cash flow is now down to $1.2 billion—a 95% drop from Q1 2025. Only Google’s enormous revenue gains—and CEO Sundar Pichai’s claim that the company is so compute constrained that it can’t meet existing demand—seemed enough to convince investors not to sell off stock.

Bottom line: The $725 billion isn’t a ceiling. Meta’s reportedly raising up to $25 billion in bond sales this week to keep spending—on the heels of Alphabet’s own $20 billion-plus bond sale in February. This week was the first time anyone asked for the receipts—and only one company could show it. That bar is only going to get higher. —WK