Big Tech cuts share buybacks 83% to fund $557B AI spending in 2026

Record operating cash flow but free cash flow turns negative

According to Reuters analysis of data from LSEG, Microsoft, Alphabet, Amazon, Meta, and Oracle generated a record $542.9 billion in operating cash flow in the first nine months of 2026, a 29% increase from the previous year. However, capital spending more than doubled to $556.9 billion, surpassing operating cash flow for the first time since 2011. This surge in spending pushed the group’s free cash flow into a $14 billion deficit, compared to a $143.5 billion surplus a year earlier.

The companies returned only 9.3% of their operating cash flow to shareholders as dividends and buybacks, the lowest share in at least 15 years. A year earlier, that figure was 27.4%.

Share buybacks plummet as AI spending takes priority

Share buybacks by the five companies fell 83% to $13.6 billion in the first nine months of 2026, down from $81.8 billion in the same period last year. Alphabet and Meta halted buybacks entirely, while Microsoft reduced its repurchases to $4.4 billion in the September quarter, down from $5.7 billion a year earlier.

Dividends rose to $37 billion from $33.9 billion, but the combined $50.6 billion in payouts was funded through cash reserves, borrowing, or share sales due to negative free cash flow. Amazon and Alphabet raised $48.1 billion and $41.4 billion, respectively, through debt and equity issuance to cover operations and payouts.

Impact on earnings and investor returns

The reduction in buybacks may weigh on earnings per share (EPS), as repurchases have historically boosted EPS by reducing share counts. Alphabet, for example, cut its share count by 9.5% between 2020 and 2025, adding roughly 2% annually to EPS.

Franklin Templeton’s Ehren Stanhope noted that the shift in capital allocation could lead to greater reliance on equity and debt issuance, signaling a request for capital from investors. Technology and communication services stocks delivered a shareholder yield of just 0.28% in July 2026, compared to 1.99% for the rest of the market, according to MSCI data cited by ING.

Long-term AI commitments drive spending

The five companies have committed over $3 trillion to AI infrastructure build-out. Amazon’s capital spending reached $75.9 billion in Q3 2026, nearly 80% higher than its operating cash flow for the quarter. The company expects total capital expenditure for 2026 to reach $220 billion and has secured an $80 billion borrowing facility against its AI hardware assets.

Oracle has set a free cash flow target of $30 billion by 2029, while Amazon CEO Andy Jassy indicated the company will continue increasing AI spending into 2027. JPMorgan’s Mark Schilsky described the current spending cycle as "not a sprint but a marathon," emphasizing the long-term focus on AI investment.

What this means

Lazyfounder analysis — our interpretation, not reported fact.

For founders and operators, Big Tech’s pivot signals a broader market shift: capital discipline is now defined by AI-driven growth rather than shareholder returns. The free cash flow deficit and reliance on debt or equity to fund payouts suggest that even the most cash-rich companies are prioritizing infrastructure over near-term shareholder value. This could pressure smaller players to justify their own AI spending or risk falling behind.

The 83% cut in buybacks also hints at a structural change in investor expectations. With shareholder yields for tech stocks lagging the broader market, founders may face scrutiny over how they balance growth investments with returns. For startups, this could mean tougher funding conditions if investors pivot toward sectors with clearer paths to profitability.

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