Microsoft earnings and AI capex: what the filings show

We read the latest quarterly filings of Alphabet, Microsoft and Meta. Alphabet spent $51,355 million on property and equipment in the quarter to 30 September 2026, 40.3% of its $127,577 million revenue, and its free cash flow was negative $9,065 million¹. Microsoft spent $39,367 million, 42.7% of its $92,279 million revenue², and stayed free-cash-flow positive³. Over the latest year Alphabet's headcount rose to 204,757¹, while Microsoft had about 223,000 full-time employees, down from about 228,000⁴ and Meta's fell 15%⁵. Central banks and the IMF warn about valuations and debt; the companies point to backlogs. This is information, not investment advice.

How much are the big AI spenders spending, and how is it paid for?

Microsoft, Alphabet and Meta are building data centres and buying chips and servers on a scale with few precedents. The numbers moved in the last two weeks as the companies reported. The questions are simple. How much is capital expenditure, or capex, as a share of what they earn? Is it paid for from the cash the business generates, or from borrowing and selling shares? And what has happened to headcount while the spending rose?

Two terms. Capex is money spent on long-lived assets such as buildings, servers and chips. Free cash flow is operating cash flow minus capex: the cash left after the spending.

Which records did we use?

We used the companies' own filings with the US Securities and Exchange Commission: earnings releases (8-K), quarterly reports (10-Q) and annual reports (10-K). SEC data are public, and the quarterly figures that are not printed in a release are derived by subtracting year-to-date totals in the filings' machine-readable data⁷. Alphabet's official call transcript is used for its outlook. Microsoft's call figures come from a third-party transcript and are labelled as such. Amazon had not filed when we checked, so it is not included.

How did we compare the companies?

Microsoft's fiscal year ends in June, so we aligned its quarters to the calendar quarter in which they end. We used the cash capex line for each company, which is purchases of property and equipment. Microsoft also acquires equipment through finance leases that do not appear in that cash line, and Meta defines its own capex measure to include finance-lease principal, so the totals each company quotes are higher. We state which measure we use each time.

Where a company gives a figure on a call that we cannot reconcile to its filing, we say so rather than choose one. For example, Microsoft's finance chief gave a broader figure of $45.2 billion for the quarter including finance leases, which does not match the filing's cash line plus the lease additions⁸, so we use the filing.

How much of revenue goes on equipment?

A large and rising share. Alphabet's capex was $51,355 million in the September 2026 quarter against $23,953 million a year earlier¹, and Microsoft's cash additions to property and equipment were $39,367 million against $19,394 million³. Both more than doubled in a year (our arithmetic: about 114% and 103%). Meta's cash capex was $33,942 million⁵, against $18,829 million a year earlier by our derivation from the filings.

As a share of revenue, Alphabet's capex was 14.8% in the September 2024 quarter⁶ and 40.3% two years later. Microsoft's was about 23% and then 42.7%. For a full year, Microsoft's cash additions to property and equipment were $115,948 million in fiscal 2026, $64,551 million in 2025 and $44,477 million in 2024⁴.

Is it paid for from cash flow?

For Alphabet, no longer. Its operating cash flow of $42,290 million was below its capex in the third quarter, leaving free cash flow of negative $9,065 million¹. Over nine months operating cash flow was $127,149 million against capex of $131,953 million⁹. In the same nine months, Alphabet raised $85,222 million of debt, $42,870 million from selling common stock and $19,063 million from preferred stock, and did not repurchase shares, against $39,810 million of repurchases in 2025⁹.

Microsoft is in a different position. Its operating cash flow of $58,000 million exceeded its capex, leaving about $18.6 billion³, though that is down from about $25.7 billion a year earlier (our arithmetic from the filings). Meta reported free cash flow of negative $2.12 billion for the quarter and raised $24,910 million of long-term debt in the first nine months⁵.

What are they buying, and what do they say?

Alphabet says most of its spending is servers and networking equipment: about 65% of its third-quarter technical-infrastructure investment, with a useful life of about six years, and the rest data centres¹⁰. Short asset lives matter, because they raise annual depreciation. Alphabet's depreciation was $8,369 million against $5,611 million a year earlier, up about 49% while revenue rose about 25%¹ (our arithmetic). Microsoft's depreciation expense was $34.3 billion in fiscal 2026, $22.0 billion in 2025 and $15.2 billion in 2024⁴.

We continue to expect our CapEx to increase significantly in 2027, and we'll provide further details on our Q4 call.

— Anat Ashkenazi, Alphabet chief financial officer, Q3 2026 call

Alphabet kept its 2026 capex guidance at $195 billion to $205 billion¹⁰. Meta narrowed its 2026 range to $135 billion to $145 billion⁵. Microsoft's finance chief said capex for the next quarter would be over $50 billion⁸, per a third-party transcript.

Both Alphabet and Microsoft point to demand. Alphabet reports Google Cloud revenue growth of 103%¹. Microsoft's 10-Q reports a commercial remaining performance obligation of $677 billion, up 73%, and leases not yet commenced, mainly data centres, of $364.6 billion³. Those are contracts and commitments, not revenue already earned. Microsoft's own annual report says its AI capital investments are in advance of fully developed revenue streams⁴.

What happened to headcount?

Microsoft had about 223,000 full-time employees at 30 June 2026⁴, against about 228,000 a year earlier¹¹. On 26 October it offered voluntary exits to a reported 60,000 people; Microsoft says AI is not driving the offer¹². We covered what is confirmed in a separate piece on Microsoft's layoffs and voluntary exit offer (https://therealigned.com/story/microsoft-layoffs-voluntary-exit-offer-confirmed). Meta's headcount of 66,775 is down 15% from a year earlier, by the company's figure⁵. Alphabet went the other way: 204,757 employees against 190,167 a year earlier¹.

The pattern is spending rising fast at all three and headcount falling at two of them. That is a correlation in the filings, not proof that spending replaced staff, and Alphabet's rise shows the link is not universal.

Is it a bubble, or a build-out?

Official bodies are cautious. The Bank for International Settlements says the largest hyperscalers' AI spending is outpacing their earnings and free cash flow, and warns of over-commitment¹³. Its March review says hyperscaler bond issuance topped $100 billion in 2025 and that off-balance-sheet structures are economically akin to debt¹⁴. The Bank of England's Financial Policy Committee said AI valuations fell sharply in July and could face a sharper repricing, and noted rising debt financing of AI investment¹⁵. The IMF names an AI-related market correction as one of its salient risks¹⁶.

The market's reaction was not uniform. Reuters reported that Alphabet shares sold off sharply after the results, with attention on its cash burn¹⁸. Share prices change daily, and this piece does not predict them.

What are the limits?

Capex definitions differ. We use the cash line for property and equipment, which excludes Microsoft's non-cash finance-lease additions and uses Meta's cash figure rather than its own broader measure. The finance chief's $45.2 billion for Microsoft's quarter could not be reconciled to the filing, and the call's "calendar year" figure of about $170 billion did not name the year, so we do not use it.

Microsoft's call figures come from a third-party transcript. Alphabet's contractual commitments are given as $924 billion plus $152 billion on the call and $802.1 billion in the 10-Q, and we could not reconcile them. Single-quarter figures that are not printed in releases are derived by subtraction. Alphabet's cloud growth and backlog figures are company statements, not audited results.

The studies we cite are warnings and estimates, not forecasts of what will happen, and the IMF's full stability report was not opened; we used its summary blog. Headcount dates differ between companies. This is a descriptive comparison, so nothing here shows whether the spending will earn a return.

Conflicts of interest

The Realigned has no commercial relationship with any company or institution cited here and holds no position in their shares. This piece is information, not investment, financial, legal or tax advice. Our wider coverage includes arguments for markets and price signals; we have reported the companies' own statements as theirs.

The short version

Microsoft, Alphabet and Meta are spending huge sums on AI equipment and data centres. For Alphabet and Microsoft it is now more than 40 cents of every dollar they earn. Microsoft still has cash left over after the spending. Alphabet does not: it has been paying for part of it with borrowing and by selling shares. At Microsoft and Meta the number of employees fell over the last year, while at Alphabet it rose.

Banks and the IMF warn that prices and borrowing could unwind. The companies say customers have committed. Nobody can know yet. This is information about public filings, not advice about buying or selling shares.