Key Points
Microsoft has entered bear market territory, dropping over 21% this year, while Amazon and Alphabet have performed comparatively better. All three companies are investing heavily in artificial intelligence (AI), collectively spending around $650 billion in 2026.
In Q2 of FY 2026, Microsoft reported $37.5 billion in capital expenditures, a 65% increase year-over-year. Meanwhile, Azure’s revenue rose 39%, contributing to overall cloud revenue of $51.5 billion. However, AI digital assistant Microsoft 365 Copilot only saw 15 million paid seats, compared to 450 million in total paid Microsoft 365 commercial seats, raising questions about return on AI investments.
In the same year, Amazon is expected to spend $200 billion on AI, leading to negative free cash flow estimates between $17 billion and $28 billion. Alphabet is projected to spend $185 billion, likely reducing its free cash flow from $73.3 billion to $8.2 billion in 2026. Microsoft’s estimated spending stands at $145 billion.
