Big Tech firms, including Alphabet, Microsoft, Amazon, and Meta, are significantly cutting back on stock buyback programs to fund an unprecedented surge in AI infrastructure spending. For instance, Alphabet and Microsoft spent approximately $11 billion on buybacks last quarter, while Amazon and Meta made no buybacks, a combined low since 2019. This strategic shift is driven by the race to develop advanced AI capabilities, with these four companies projected to spend over $700 billion combined on capital expenditures this year alone.
This re-prioritization is having a profound impact on their financial metrics. PIMCO estimates that hyperscaler capital expenditures will absorb roughly 94% of operating cash flow in 2025 and 2026, a sharp increase from about 40% in 2023. As a result, the combined free cash flow for Alphabet, Microsoft, Meta, and Amazon is projected to fall by 64% over the next four quarters, declining from approximately $270 billion in 2025 to about $96 billion. This reduction in free cash flow, which traditionally fuels dividends and buybacks, means companies may need to curtail these activities or resort to borrowing more, or issuing new equity.
Analysts like Robert Schiffman from Bloomberg Intelligence noted that this setup points to an "extended period of reduced share buybacks," not due to a lack of financial flexibility, but a reallocation of capital towards AI. The sheer scale of investment in AI data centers, GPUs, and power infrastructure, estimated to be around $750 billion for hyperscalers like Alphabet and Meta, is forcing these companies to seek alternative funding methods. Google recently announced plans to raise nearly $85 billion in equity, with Meta reportedly considering a similar move, signaling an unprecedented wave of new stock issuance that stands in stark contrast to previous decades of buyback-driven stock scarcity.
