avday Alphabet, Amazon and Meta each spent more on data centres, chips and other equipment from July to September than their businesses brought in as cash. Alphabet borrowed $29.0bn and sold $12.4bn of new shares in the quarter, and bought back no stock, after $11.5bn of buybacks a year earlier.
On Thursday 29 October, Alphabet’s Class A shares fell 12.6% to $283.82, wiping out about $482bn of market value, Fortune reported. It was their worst day since they began trading in 2004. The Nasdaq 100 fell 1.4%, but the equal-weight S&P 500, where every company counts the same, rose 1.2%, Bloomberg reported: the selling was in the biggest names.
“At this point, the market isn’t just asking how fast you can grow. It’s asking what you have to spend to get there,” Jake Behan, head of capital markets at Direxion, told Reuters on 30 October.
Why tech stocks are down when revenue is booming
Sales are growing fast. In the third quarter:
- Alphabet: revenue up 25%, and Google Cloud up 103% to $30.7bn.
- Amazon: AWS sales up 39% to $46.0bn.
- Microsoft: Azure revenue up 48%.
- Meta: revenue up 26% to $64.6bn.
The problem is the bill, and the measure that shows it is free cash flow. That’s the cash a business brings in from operations, minus what it spends on long-lived assets such as data centres, servers and chips (capital spending, or capex). When it’s negative, the company pays for the build-out with money from somewhere else: savings, borrowing or selling shares.
Alphabet more than doubled its capex from a year earlier. Its free cash flow went from -$5.9bn in the second quarter to -$9.1bn in the third. It kept its 2026 capex plan of $195bn to $205bn, CNBC reported.
Amazon says its year-on-year increase in spending “primarily reflects investments in artificial intelligence.” It raised $48.1bn of long-term debt in the quarter.
Meta reported on 21 October that free cash flow “was negative $2.12 billion”. Its shares fell 7.0% the next day, Reuters reported.
Microsoft still makes more cash than it spends
Microsoft doubled its spending on property and equipment from a year earlier, to $39.4bn. But operations brought in $58.0bn, leaving about $18.6bn. Its shares fell just 0.2% on 29 October “even though the company reported surging cloud growth and kept capital expenditures in check,” Bloomberg reported.
Not every reason was about spending
Bank of America analyst Justin Post also pointed to a “slowdown in high-margin search growth” at Google, Fortune reported on 29 October. And over the past twelve months, Alphabet’s free cash flow was still positive, at $19.7bn.
Friday: Amazon and Intel pull futures lower
At 04:04 ET (08:04 UK time) on Friday, Nasdaq 100 futures were down 2.16%, Reuters reported. Amazon was down 7.2% and Intel 25% in premarket trading, moves that may change by the US open at 13:30 UK time.
Intel’s fall is a separate story, about PCs. It forecast fourth-quarter revenue of $15.0bn to $16.0bn, below the $16.5bn it made in the third.
