Amazon, Alphabet and Meta have come under heavy pressure from investors after reporting billions of dollars in negative free cash flow in the third quarter of 2026, as record spending on artificial intelligence infrastructure coincided with weaker-than-expected performance in some of their established businesses.
The financial results have intensified concerns about whether the technology giants can generate sufficient returns from their expanding AI investments, particularly as advertising, consumer spending and online retail show signs of slowing. Their difficulties have also emerged amid growing competition from newer players in the artificial intelligence industry, including OpenAI and Anthropic, which is preparing for a potential stock market listing.
Amazon reported negative free cash flow of US$42.4 billion, compared with positive cash flow of US$14.8 billion during the same period a year earlier. The deterioration followed a US$94.8 billion increase in purchases of property and equipment, net of proceeds from sales and incentives, largely associated with investment in AI infrastructure. It was the company’s second consecutive quarter of negative free cash flow.
The company reiterated its forecast for capital expenditure to reach US$220 billion in 2026. However, its shares fell by as much as 10 per cent following the results, after revenue and profits came in below analysts’ expectations. The decline was compounded by downgrades from investment banks including StoneX and Raymond James.
Amazon also reported slower growth in two important businesses. Advertising services revenue increased by 11 per cent, its slowest rate since the segment became a separate reporting category in 2022. Online store sales grew by just 2 per cent, the weakest rate in more than three years.
Alphabet, the parent company of Google and YouTube, also reported negative free cash flow, recording a deficit of US$9.1 billion against positive cash flow of more than US$24 billion in the corresponding quarter last year. It was the second consecutive quarter in which the company had recorded negative free cash flow, an occurrence not previously seen since its stock market listing more than two decades ago.
Its shares fell by more than 12 per cent in a single trading session, wiping nearly US$500 billion from its market capitalisation. Investor concerns centred on the returns from its rapidly expanding AI expenditure. Alphabet invested US$51.3 billion between July and September, a record for the company and an increase from US$44.9 billion in the previous quarter. It expects capital expenditure to reach US$205 billion for the full year.
Concerns were compounded by slower growth in Google’s traditional advertising business. Revenue from search advertising and other channels, which account for nearly half of Alphabet’s total income, expanded at its slowest rate in five quarters.
Meta is facing similar financial pressures. The company, led by Mark Zuckerberg, reported negative free cash flow of US$2.12 billion in the third quarter, marking its third consecutive quarter in which capital expenditure exceeded cash generated from operations. Its capital spending reached US$34.91 billion.
Meta shares have fallen by nearly 10 per cent since the quarterly results were released. The company has also announced a potential share placement initially valued at up to US$95 billion, subsequently increased to US$97.5 billion. If completed, the capital increase could become the largest in history, surpassing an offering announced by Alphabet in June.
Microsoft presented a contrasting financial picture. Despite investing US$45.2 billion in AI infrastructure and equipment, it generated positive free cash flow of US$18.6 billion during the quarter. Revenue increased by 19 per cent to US$92.3 billion, while the company returned US$10.2 billion to shareholders through share buybacks and dividends.
The company, led by Satya Nadella, also returned to the debt market after nine years, launching a US$25 billion bond issue. It joined a wider fundraising trend among major technology companies, including Amazon, Alphabet, Meta, Oracle and Nvidia, as the industry finances its expanding infrastructure requirements.
Pressure across the sector has also extended to semiconductor manufacturers. Intel recently issued fourth-quarter forecasts below analysts’ expectations, citing slower personal computer sales, sending its shares sharply lower.
Investors are now turning their attention to Apple’s quarterly results, scheduled for Monday, with particular interest in the company’s forecasts for the following quarter and the performance expected during the Christmas shopping season.
