Hyperscalers Are Spending $492B a Year on Capex, and Free Cash Flow Has Fallen to $42B

The three largest hyperscalers have an aggregate trailing-twelve-month capex of about $492 billion against combined free cash flow of just $42 billion. Amazon is now FCF-negative, and Alphabet's free cash flow has fallen by roughly three quarters from its last fiscal year. Nvidia, the clearest recipient of that spending, trades at 11.7x forward earnings, while the two hyperscalers with the heaviest capex burden show forward P/Es above their trailing multiples.

The capex picture

On a trailing basis, Amazon is spending the most in absolute terms at $196.1B, followed by Alphabet at $159.8B and Microsoft at $135.9B. Each has stepped up sharply from its last reported fiscal year, though the comparison windows differ (Microsoft's fiscal year ended June 2026, Alphabet's and Amazon's in December 2025).

Percentage changes and totals are calculated from the snapshot figures.

Spending across the three rose by about $153B between the last fiscal year and the trailing twelve months, and aggregate free cash flow fell by about $106B over the same span. The two figures are not a one-for-one offset, since operating cash flow also moves, but the direction is unambiguous.

What it is doing to free cash flow

Adding absolute capex back to free cash flow gives an implied operating cash flow, a derived figure rather than a reported one. On that basis, trailing capex consumes roughly:

• Microsoft: about 69% of implied operating cash flow (~$196B), leaving $60.0B of free cash flow.
• Alphabet: about 89% (~$180B), leaving $19.7B.
• Amazon: about 124% (~$159B), so spending exceeds internally generated cash, and free cash flow is -$37.6B.

Microsoft is the most insulated. Its TTM free cash flow of $60.0B is down about 10% from the $67.0B in its last fiscal year, even as capex rose. Alphabet's decline is much steeper, from $73.3B to $19.7B. Amazon has swung from $7.7B positive to $37.6B negative, a deterioration of about $45B.

For an investor, the point is that these companies are no longer funding AI buildouts purely from surplus cash. At current run rates, Amazon's gap must be covered by its balance sheet or by external financing. The snapshot contains no debt or cash data, so we cannot size that cushion here.

The other side of the ledger: chip suppliers

One company's capex is another's revenue. The snapshot does not include revenue, so free cash flow is the available proxy for how much of the spending is landing as supplier profit.

Nvidia's TTM free cash flow is $127.0B, up about 31% from $96.7B in its fiscal year ended January 2026, on capex of only $7.4B. Its own capital intensity is trivial, and the hyperscalers' outlays show up as cash on its side. AMD is far smaller: $7.1B of TTM free cash flow (versus $6.7B for its last fiscal year) on $2.1B of capex. The scale gap is stark. Nvidia's free cash flow is roughly 18 times AMD's and equal to about a quarter of the hyperscalers' combined capex.

How the market is pricing it

Implied direction is the ratio of trailing to forward P/E at the current price. FCF yield is TTM free cash flow divided by market cap. Both are our calculations.

The pattern splits cleanly. Nvidia and AMD show steep compression from trailing to forward multiples, meaning the market expects earnings to grow substantially. Nvidia at 11.7x forward is the cheapest name in the group on earnings and offers the highest FCF yield at 2.8%. AMD's 95.9x trailing multiple falls to 25.5x forward, so its valuation depends heavily on that expected earnings jump arriving.

Microsoft sits in the middle. It carries a rising capex bill but a forward multiple that still implies solid earnings growth.

Alphabet and Amazon are the anomaly. Both have forward P/Es higher than trailing, which on its face implies analysts expect lower earnings ahead. The snapshot does not explain why. One possibility is that depreciation from the capex surge weighs on forward earnings. Another is that trailing earnings include non-recurring items. We cannot distinguish between these from the data, and readers should check the earnings detail before drawing a conclusion. Alphabet's 14.9x trailing multiple against a 0.6% FCF yield shows how far reported earnings and cash generation have diverged.

What to watch next

1. Amazon's funding path. With TTM free cash flow at -$37.6B, watch whether capex growth moderates or financing fills the gap.
2. Alphabet's cash conversion. A drop from $73.3B to $19.7B in free cash flow is the sharpest in the group. Stabilization would matter more than any single multiple.
3. Forward P/E versus trailing for GOOGL and AMZN. If forward earnings estimates rise and the inversion closes, the market is looking through the spending. If it widens, depreciation is becoming the story.
4. Nvidia's free cash flow versus hyperscaler capex. A divergence, with capex flattening while supplier cash flow still expands (or the reverse), would be an early signal of where the cycle stands.
5. AMD's earnings delivery. Its forward multiple is only reasonable if the implied earnings recovery materializes.

The core tension is that suppliers are being paid in cash now, while buyers are being asked to wait for returns. The data show the first half clearly and the second only as a forward multiple.

This note is for informational purposes only and does not constitute investment advice.