Microsoft, Alphabet, Amazon, Meta and Oracle produced record operating cash flow in the first nine months of 2026, but their AI-related capital expenditures rose so sharply that investment outlays exceeded cash generation. As a result, the five companies’ combined free cash flow moved from a surplus into a deficit, and share buybacks fell sharply.
Key figures and shifts
- The five companies’ operating cash flow rose 29 percent to a peak of $542.9 billion.
- Capital expenditures doubled to $556.9 billion.
- Combined free cash flow swung from a $143.5 billion surplus in the prior year to a $14 billion deficit in the first nine months of 2026.
- Only 9.3 percent of cash generated this year was returned to shareholders via dividends and buybacks in the first three quarters, down from 27.4 percent a year earlier.
Shareholder payouts and buybacks
- Dividends edged up slightly to $37 billion.
- Buybacks plunged 83 percent, from $81.8 billion to $13.6 billion.
- Alphabet and Meta did not repurchase any shares in 2026, after spending $66.5 billion on buybacks a year earlier.
- Amazon has not conducted buybacks since 2022 and does not pay a dividend; the remaining buybacks were largely attributable to Microsoft, although Microsoft also cut its repurchases to $4.4 billion in the quarter ended September.
Because aggregate free cash flow turned negative, the companies funded $50.6 billion of shareholder payouts not from operating cash flow but from cash reserves, borrowings or share issuance.
Examples of financing responses
- Amazon’s third-quarter capital spending was $75.9 billion, roughly 80 percent higher than its operating cash flow for the quarter. The company raised $48.1 billion in long-term debt and is forecasting about $220 billion of capital expenditure for the full year.
- Alphabet raised $12.4 billion from share issuance and took on an additional $29 billion in debt.
Broader implications of reduced buybacks
Share repurchases have for years artificially boosted earnings per share (EPS) by reducing the number of shares outstanding. ING’s calculations show Alphabet reduced its share count by 9.5 percent between end-2020 and 2025, which alone produced roughly a two percentage-point annual EPS uplift. With buybacks curtailed, EPS growth will increasingly need to come from actual profit growth, even as depreciation linked to new data centers begins to rise.
Analysts at JPMorgan note that investors tend to focus more on EPS than on free cash flow, while Franklin Templeton experts observe that after a fifteen-year era of heavy capital return, markets are shifting toward funding via equity and bond issuance.
Conclusion
In the first nine months of 2026, AI-driven capital spending by the largest US technology firms outpaced cash generation, flipping free cash flow into negative territory, sharply reducing buybacks and forcing shareholder payouts to be financed from reserves, debt or equity issuance. That change shifts the burden for EPS growth toward real profit gains and may alter market dynamics in coming quarters.
An AI assistant helped prepare this article; the final content was edited and verified by our journalist.
