Meta, Amazon and Alphabet report free cash flow below $0

Meta, Amazon and Alphabet reported free cash flow below $0, the cash left after all costs, for the last quarter, and the Amazon outflow was $42.4 billion. Microsoft stayed above $0 at $18.63 billion, but its cash flow fell 27% and it will borrow in the bond market. Primary businesses, such as advertising, pay for the AI data centers.

What is new

Primary businesses fund the AI spending. Amazon sales grew 2% in the year, and analysts expected more. Alphabet growth in its primary business was less for a third quarter. Its shares had a record drop.

The numbers

Amazon expects capital spending of $220 billion this year. Meta says its spending will be $145 billion, and it plans to get $95 billion in stock. No firm gave a number for next year, but all imply more growth.

What is not known

Christopher Ballard of Check Capital Management says the Alphabet outflow is small. Its income from business was more than $40 billion. Tracy Woo of Forrester says AI spending can be more than the cash from the advertising business.

Insight: Large firms can last longer than small AI cloud firms

When interest rates go up, debt costs more for neoclouds (small cloud firms that rent AI computers). Gartner forecasts that more than 80% of them will stop operation. The large firms use profits from primary businesses, bonds and new stock. This reads as a test of cash. The firms with the most cash can stay in business after their suppliers stop. Leaders must check how each AI vendor pays for its computers.