Big Tech Profits From AI and Cloud While CapEx Drains Free Cash Flow

Overview

• Amazon, which reported Thursday, posted $62.6 billion in GAAP net income that included $53.4 billion of pre‑tax non‑operating gains tied to its Anthropic stake and saw AWS revenue jump about 37%, even as heavy AI infrastructure spending turned free cash flow negative by roughly $7.6 billion.
• Microsoft and Alphabet delivered strong cloud and AI revenue gains that reinforced confidence in monetization, with Azure sales rising about 43% and Google Cloud surpassing roughly $25 billion per quarter, helping lift sector sentiment.
• Meta’s July results disappointed investors: revenue was $60.8 billion, net income fell 14%, free cash flow collapsed to $784 million year‑over‑year, and the company raised 2026 capex guidance to $130–$145 billion while guiding Q3 revenue below analyst averages.
• The common thread across reports is very large capital expenditure for data centers, chips and AI capacity that is compressing free cash flow across hyperscalers and shifting investor focus from headline profits to the timing and destination of returns.
• Market reactions split: Amazon shares rose on clear AWS traction, Meta shares plunged after weak guidance, and the next signals to watch are whether Meta can monetize spare compute through its internal 'Meta Compute' plan and whether cloud demand sustains margin recovery for investors and customers.