Q2 2026 Earnings: Big Tech's AI Capex Race Hits $730 Billion (Microsoft, Meta, Amazon, Google)

Alphabet opened on July 22: Q2 revenue of $119.8B (+24%), Google Cloud accelerating to +82%, but capex of $44.9B (roughly 2x YoY), full-year guidance raised to $195-205B, and free cash flow of negative $5.9B — its first negative quarter since the 2004 IPO. On July 29, Microsoft posted FY26 Q4 revenue of $90B (+18%) with Azure at 43% and quarterly capex of $41B; fiscal-year cash capex reached $115.95B (+80%), while its calendar-2026 expectation was restated from ~$190B to ~$175B on a lease-accounting shift. Meta's quarterly capex hit $31.08B (+83%), guidance rose to $135-145B, EPS missed by ~14%, and free cash flow shrank to $784M. Amazon closed the week on July 30: revenue topped $200B, AWS grew 37% (fastest in 18 quarters), quarterly capex was $54.2B, and 2026 guidance rose to ~$220B on memory prices. The four now guide to roughly $730B combined.

The same capex escalation earned opposite verdicts within one week. Alphabet fell over 4% after hours and roughly 5-7% cumulatively over subsequent sessions (windows vary), and per CNBC's July 28 report its results sparked a sector-wide sell-off ahead of the other three reports. Meta dropped ~9.6% after hours, then 10% on July 30 — its worst day of the year — and kept sliding into early August. Microsoft, by contrast, jumped ~8% after hours: commercial RPO reached $678B (+84%), Copilot hit 30 million paid seats (~$10B annualized), and capex guidance stayed steady. Amazon surged ~15% on July 31 and crossed a $3 trillion market cap on August 3, the fifth company ever, on the back of a $496B AWS backlog that grew $132B in a single quarter. The logic: markets no longer punish spending per se — they distinguish capex backed by contracted demand (RPO, backlog) from capex paired with deteriorating free cash flow.

Four destinations absorb the ~$730B. Compute remains the biggest: Alphabet said ~60% of Q2 spend went to servers and 40% to data centers; Microsoft said about two-thirds went to short-lived assets such as CPUs and GPUs. Memory is the new swing factor: analysts estimate it will take ~30% of hyperscaler AI data-center spend in 2026 versus ~8% in 2023-24; DDR5 is up ~110% this year and HBM capacity at SK Hynix, Samsung, and Micron is sold out through 2026 — Microsoft (~$25B component-price impact), Amazon ($20B guidance raise attributed to memory), and Meta all cited it explicitly. Power is the next constraint: Jassy said capacity will stay short through 2027; Korean power-equipment stocks surged on August 1 (Hyosung Heavy +27.6%, LS Electric +23.0%) and US peers hit new highs. In-house silicon is going mainstream: Amazon's chip business runs above a $25B annualized pace with $225B in multi-year commitments, while Google's TPU won an Anthropic deal for up to one million chips and reportedly sells capacity to Meta.

Bears hold four cards: deteriorating cash flow (Alphabet's quarterly FCF turned negative; Meta's fell to $784M; some analysts estimate Amazon's full-year 2026 FCF could go negative — forecasts are uncertain); debt-funded capex (per FactSet, incremental debt rose from ~9% of hyperscaler capex in FY24 to ~32% by mid-2026, with $100B+ of bonds in six months; Moody's counts ~$662B of signed-but-not-commenced off-balance-sheet data-center leases); the depreciation wall (short-lived assets dominate capex, and useful-life assumptions — including Microsoft's extension for buildings, which some investors question — swing earnings materially); and circularity (giants fund model developers, who rent their compute, whose revaluations then inflate the giants' profits). Bulls counter with contracted demand ($678B RPO, $496B backlog), simultaneous cloud acceleration (43%/37%/82%), real monetization (~$10B Copilot run-rate), and operating cash flows above $150B per quarter combined — fundamentally unlike the leveraged builders of the 2000 telecom bubble. We draw no verdict; the full evidence table sits in the locked sections.