Big Tech Capex Scorecard: Free Cash Flow Hits -$31.8B

The Big Tech free cash flow forecast PRISM relayed in July was zero. Measured against Q3 2026 results, the number is -$31.8 billion (PRISM calculation).

Microsoft, Alphabet, Amazon, Meta and Oracle. In the third quarter, these five US Big Tech companies spent $31.8 billion more on capital expenditures than they brought in from operations. That's the sum of the cash flow statements in the 8-K earnings releases (Exhibit 99.1) each company filed with the US Securities and Exchange Commission (SEC). The forecast under review comes from PRISM's July article. Citing a June 16 analysis by Epoch AI, an AI research group, it reported that the five companies' combined free cash flow would reach zero in Q3 2026.

Here's the bottom line. Every actual quarter in Epoch's CSV through Q1 2026 showed positive combined FCF, and the last one, Q1, came in at +$9.5 billion (PRISM calculation). In Q3, the total dropped below zero. That's consistent with Epoch's "around Q3 2026" (we didn't calculate a Q2 total). The drop went much deeper than the +$1.4 billion the trend line pointed to, because capex ran $44.7 billion above trend (PRISM calculation).

Free cash flow (FCF) is the cash left after subtracting capital spending from operating cash flow. Capital expenditures (capex) are what a company spends on physical assets such as data centers, servers and chips.

What the July article predicted

Epoch's conclusion reads: "aggregate cash capex across hyperscalers is on track to overtake operating cash flow around Q3 2026." Epoch estimated that operating cash flow at the hyperscalers (the largest cloud providers) is growing about 23% a year and cash capex about 70% a year, so the two lines cross around Q3 2026.

It also gave a date for each company. Oracle had already crossed and Amazon was crossing; Alphabet would follow in Q1 2027, Meta in Q3 2027 and Microsoft in Q3 2028. The July article carried all five dates as they were.

The FCF scorecard: two hits, two arrived early

We scored on Epoch's definition: operating cash flow minus purchases of property and equipment from the cash flow statement. Amazon discloses FCF only on a trailing-twelve-month (TTM) basis, so we judged it on that figure. For the others, we looked at the first quarter in which quarterly FCF turned negative.

Table 1. Crossover dates in the July article (Epoch, June 16) vs. Q3 actuals (Meta's Epoch-definition figure and the combined total are PRISM calculations)

The July article split the five into two groups: Oracle and Amazon, which had crossed or were crossing, and Alphabet, Meta and Microsoft, whose crossovers lay in 2027–2028. Q3 results moved Alphabet and Meta into the first group. Microsoft is the only one still in the black.

Where the trend line missed

Table 2. Epoch trend values vs. actuals ($ billions; Q3 2026 actuals are the sum of each company's 8-K; the FCF row and the vs.-trend column are PRISM calculations from unrounded figures)

Most of the gap between trend and actual came from the capex line. Operating cash flow also beat trend, but only by about a quarter of the capex overshoot.

Year over year, on a single-quarter basis, operating cash flow rose 18.8% and capex 117.8% (PRISM calculation). Those figures aren't directly comparable with the annual trends Epoch fitted across many quarters (23% and 70%), so we use them only to confirm direction.

Same "FCF," different numbers

Companies use the same three letters but calculate FCF differently. Meta also subtracts principal payments on finance leases. A finance lease is a long-term lease that lets a company use equipment while accounting for it as if it had bought it.

Table 3. Q3 FCF as reported vs. recalculated on a common definition ($ billions; last column is a PRISM calculation)

Summing the five the same way for a year earlier matches the Q3 2025 actual in Epoch's CSV (Table 2). Applying each company's own definition instead gives -$31.4 billion (PRISM calculation; Amazon's quarterly figure is a PRISM conversion that reflects sale proceeds).

Company by company

Oracle: Customer prepayments for capex sit inside operating cash flow

Oracle's fiscal year starts in June, so its fiscal Q1 2027 covers June–August 2026, a month off from the other four. In its September 10 8-K release, Oracle reported operating cash flow of $23.1 billion (up 184% year over year) and FCF of -$5.40 billion. That's five straight quarters of negative FCF.

The company's "Net Cash Outlay for Capital Expenditures" table breaks out customer prepayments for capex as a separate line. Those prepayments first appeared in the previous quarter (March–May 2026) at $4.59 billion and reached $11.36 billion this quarter. A footnote says the money is reported in "cash flows from operating activities." That's about 49% of operating cash flow (PRISM calculation). Strip the prepayments out and FCF comes to -$16.76 billion (PRISM calculation; not disclosed by the company).

Oracle points to its backlog. Remaining performance obligations (RPO), contracted revenue not yet recognized, stand at $664 billion, up $209 billion in a year. Oracle said customer demand for its AI cloud services is growing faster than supply.

Amazon: July's "about $1.2 billion" is now -$42.4 billion

The July article said Amazon's TTM FCF had shrunk to about $1.2 billion. That matches the Q1 2026 TTM figure in the company's table ($1.23 billion). In the Q3 8-K release on October 29, the same line reads -$42.36 billion. A year earlier, it was +$14.79 billion.

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Amazon attributed the decline to equipment spending. Purchases of property and equipment, net of sale proceeds and incentives, rose $94.8 billion year over year. TTM operating cash flow grew 29% over the same period, to $168.3 billion. TTM FCF had already turned negative in Q2 2026 (-$7.6 billion). Taking Q3 on its own under Epoch's definition gives -$34.84 billion (PRISM calculation).

Alphabet: Negative since Q2

Epoch put Alphabet's crossover at Q1 2027. The quarterly FCF table in Alphabet's Q3 8-K release shows FCF swinging from $10.12 billion in Q1 2026 to -$5.86 billion in Q2. Q3 came in at -$9.07 billion. Alphabet's definition matches Epoch's, so we used these figures as reported. Epoch published its analysis on June 16, two weeks before that second quarter ended.

Q3 capex was $51.36 billion, more than double the year-earlier level. Operating cash flow fell from $48.41 billion to $42.29 billion. The reason for that decline needs to be checked separately in the quarterly report (10-Q). TTM FCF stayed positive at $19.75 billion.

Meta: Negative on either definition

In its Q3 8-K release, Meta reported FCF of -$2.12 billion. Its definition subtracts principal payments on finance leases ($964 million) on top of equipment purchases, a more conservative measure than the other four use. On Epoch's definition, the figure is -$1.16 billion (PRISM calculation). The crossover Epoch expected in Q3 2027 arrived about four quarters early.

Over the past year, purchases of property and equipment rose 80% and operating cash flow 9% (PRISM calculation). Year-to-date FCF through September remains positive at $11.05 billion on the company's definition.

Meta narrowed its 2026 capex outlook (including principal payments on finance leases) to $135–145 billion, from $130–145 billion. It spent $85.8 billion on the same basis through September, so landing in that range means spending $49.2–59.2 billion in Q4 alone (PRISM calculation). That's more than the $34.91 billion it spent in Q3.

Microsoft: The only one in the black, with FCF down 27%

Microsoft doesn't include FCF in its 8-K release. On the October 28 earnings call, CFO Amy Hood reported fiscal Q1 2027 (July–September 2026) operating cash flow of $58 billion, up 29%, and FCF of $18.6 billion. FCF was down 27% from a year earlier (PRISM calculation).

The $45.2 billion in capex cited on the call includes $7.4 billion of finance leases. Microsoft books the full principal of a finance lease as capex when the lease begins. For the scorecard, we used the $39.4 billion of cash actually paid for property and equipment.

Hood explained the capex figure this way: "Capital expenditures were $45.2 billion, as some third-party capacity deliveries we expected in Q1 were delayed." She said capex in fiscal Q2 (October–December) would top $50 billion and that, reflecting those delays, calendar-2026 capex should come to about $170 billion (guidance).

Hood added that roughly three-quarters of capex went to short-lived assets such as CPUs and GPUs, and that the total includes higher memory and storage costs. We covered the memory side in our Q3 analysis of Korean memory maker SK hynix, and Microsoft's and Alphabet's capex numbers in last week's 5 Things roundup.

Epoch's Q3 2028 crossover date for Microsoft is still a long way off. Microsoft said it expects to remain FCF positive in fiscal 2027, which ends in June 2027 (guidance).

Paying for capex: from retained earnings to debt and stock

In the US, the trail runs through the financing section of the cash flow statement. In January–September 2026, three of the five raised money by borrowing and selling shares.

• Alphabet: $85.2 billion in debt issuance, $42.9 billion in common stock and $19.1 billion in mandatory convertible preferred stock in January–September 2026. Mandatory convertible preferred shares must convert into common stock on a set date. Buybacks over the same period were zero, down from $39.8 billion a year earlier.
• Amazon: $115.1 billion in long-term borrowing in January–September 2026, including $48.1 billion in Q3 alone, and $130 billion over the trailing twelve months. On September 14, it issued £4.25 billion of sterling senior notes (8-K).
• Meta: $24.9 billion in long-term borrowing in January–September 2026, with no new long-term borrowing in Q3.

Simply adding up the three companies' January–September 2026 fundraising gives $287.2 billion (PRISM calculation). That figure doesn't net out repayments, and debt and equity are different kinds of money.

Fundraising kept going from October 28 to November 2. Those amounts cover a different period, so they aren't included in the $287.2 billion above. In an 8-K release for its October 28 investor day, Oracle committed to limiting additional capital raises through fiscal 2030 to $20 billion: $10 billion in equity and $10 billion in gross debt. That cap excludes refinancing of existing debt. Oracle put its timeline for turning FCF positive in the second half of fiscal 2028 (ending May 2028) and set an FCF target of $30 billion or more for fiscal 2029 (company guidance and target). On November 2, it filed for offerings the same size as that cap. For $10 billion of common stock, it filed a preliminary prospectus supplement before setting the share price. For $10 billion of senior notes in five tranches, it filed a final pricing term sheet with the interest rates locked in.

Microsoft priced $25 billion of bonds in 10 tranches on October 29 (final prospectus supplement). On November 2, Alphabet filed a pricing term sheet for €6 billion of bonds in seven tranches. Oracle, Microsoft and Alphabet all list the use of proceeds as "general corporate purposes." Microsoft's and Oracle's prospectuses say that may include capex, while Alphabet's prospectus names repayment of outstanding debt as an example.

Q3 as seen from Korea, Japan and Taiwan

Korea: 14% of the NPS's 13F-reported US stocks

A 13F is the quarterly holdings report that institutions managing US-listed stocks above a certain size file with the SEC. The 13F that Korea's National Pension Service (NPS), the country's state pension fund, filed on August 13 (as of June 30, 2026) lists 552 holdings worth about $155.08 billion.

The five companies in this scorecard account for about $22.39 billion of that, or 14.4% of the 13F total (PRISM calculation). Alphabet, combining Class A and C shares, comes to $8.4 billion and Microsoft to $5.68 billion. The five together are worth 2.2 times the NPS's single Nvidia holding ($10.17 billion) (PRISM calculation).

The figure covers only the US-listed stocks reported on the 13F, a subset of the NPS's overseas equities, and it doesn't reflect any trades after the end of June. Still, one-seventh of the NPS's reported US stock holdings is tied to the companies scored here.

Japan: SoftBank's OpenAI money also came from bonds

SoftBank Group said in an October 1 press release that it had made a $10 billion third-tranche investment in OpenAI. That brings its cumulative investment to $64.6 billion and its stake to about 13%. The company said it funded the tranche with proceeds from the foreign-currency senior notes it announced on September 24. It's a case of AI investment outside the hyperscalers being financed with corporate bonds.

Taiwan: TSMC reaffirms $60–64 billion

TSMC, which supplies chips to Big Tech, gets 79% of its revenue from North American customers. Its Q3 revenue, announced October 15, was $46.72 billion, up 41.2% year over year. High-performance computing (HPC) made up 68%.

CFO Wendell Huang reaffirmed 2026 capex of $60–64 billion on the earnings call (TSMC IR). The July article cited TSMC guidance of $52–56 billion. This article doesn't establish when the range changed between those two points.

Chairman C.C. Wei said TSMC sends its own teams to check on data center construction and power supply at US cloud service providers (CSPs). His summary: "The feedback is so far so good, and the CSPs have been well prepared." He also said TSMC is planning cautiously for 2027, because rising component prices and economic uncertainty are squeezing consumer and price-sensitive markets.

Two readings: warning light or proof of demand?

The worried case starts with Epoch's analysis. Epoch wrote that when spending exceeds cash coming in, companies may cover the gap by drawing down cash, borrowing or issuing new shares. The brokerage estimates cited in the July article pointed the same way: Morgan Stanley put Amazon's 2026 FCF at -$17 billion, and Barclays expected Meta's 2026 FCF to fall about 90%. In Q3, capex ran $44.7 billion above Epoch's trend, and Alphabet, Amazon and Meta did raise money through debt and stock.

The counterargument comes from the companies' own statements and results.

(1) Cash generation. Combined operating cash flow beat trend by $11.5 billion (PRISM calculation). Microsoft said its operating cash flow rose 29%. There are caveats. Alphabet's operating cash flow fell from $48.41 billion to $42.29 billion, for reasons not yet confirmed. Excluding Oracle's customer prepayments, the combined total is about $187.2 billion, almost exactly the trend value of $187.1 billion (PRISM calculation).

(2) Backlog and demand. Oracle cites its $664 billion RPO to argue that AI cloud demand is outpacing supply. TSMC's Wei said "AI-related demand is being supported by strong underlying demand for AI accelerators."

(3) Microsoft's guidance. Microsoft's $18.6 billion of Q3 FCF offsets more than a third of the other four companies' combined deficit ($50.45 billion) (PRISM calculation). Microsoft expects to stay positive through fiscal 2027.

The first number that will test both readings is Q4 capex. To meet its full-year guidance, Meta has to spend $49.2–59.2 billion in Q4 (PRISM calculation), and Microsoft expects to spend more than $50 billion in October–December (company guidance). Whether operating cash flow keeps pace will show up in results due in January and February 2027.

Reading the numbers: three caveats

• Quarterly FCF is seasonal. It swings from quarter to quarter with the timing of tax payments and collections. Meta's year-to-date FCF through September and Alphabet's TTM FCF are both positive.
• The combined figure uses each company's latest reported quarter. Only Oracle's covers June–August 2026.
• Cutoff dates. Results figures reflect primary sources published through October 31, 2026. The October–November fundraising under "Paying for capex" reflects SEC filings through November 2. We checked the Epoch page again on November 2, and it showed no updates since June 16.

What to watch next

• December, Oracle fiscal Q2 2027 (September–November 2026): The size of customer prepayments for capex and the depth of the FCF deficit. We'll also watch whether Oracle holds to its timeline for turning FCF positive in the second half of fiscal 2028 (December 2027–May 2028).
• January–February 2027, Big Tech Q4 results: Whether combined FCF for the five sinks below Q3's level, and whether Amazon's TTM FCF falls further from -$42.36 billion.
• Alphabet's TTM FCF: If Q4 FCF comes in below +$4.8 billion, TTM FCF turns negative too (PRISM calculation).