1 hyperscaler megacap down, 3 to go. Alphabet raises the stakes on AI spending
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- Alphabet raised its 2026 capex forecast by $15 billion at the midpoint to $190–$205 billion and reiterated spending will rise further in fiscal 2027, pushing Q2 free cash flow to a record $5.8 billion outflow — the first negative quarterly reading in the company's history.
- Google Cloud revenue surged 82% year-over-year, but the capex guidance overshadowed the quarter and sent GOOGL down 7% on Thursday, putting it on track for roughly an 8% weekly decline and the third-worst performer in Jim Cramer's portfolio.
- Meta Platforms reports Wednesday and may finally get more spending latitude now that it's preparing to launch a public cloud business to sell excess computing capacity — though its shares plunged 9% last quarter after it hiked 2026 capex guidance to $125–$145 billion.
- Amazon kept its 2026 capex outlook unchanged at roughly $200 billion last quarter and is projected to post negative free cash flow this year, with Alphabet's swelling cloud backlog offering fresh cover for AWS to keep spending and tapping the bond market to blunt the impact.
- Microsoft reports Wednesday with roughly $190 billion in calendar 2026 capex already laid out in April; MSFT is down 20% YTD, making it one of the worst-performing megacap tech names as software-disruption fears intensified after Starbucks dropped Microsoft and IBM tools for in-house AI.
- Jim Cramer said he was not comfortable with Alphabet's capex level, noting investors no longer give hyperscalers 'a free ride' on spiraling capital expenditures without visibility toward monetization — the framing investors will apply to Meta, Microsoft, and Amazon next week.
Why it matters: Alphabet's first-ever negative quarterly free cash flow of $5.8 billion and a $15 billion 2026 capex hike show Wall Street's patience with hyperscaler spending is exhausted — with Meta, Microsoft, and Amazon reporting next week, investors will demand visible monetization paths or extend the selloff that already dragged GOOGL down 7% Thursday and left MSFT off 20% YTD.
