Goldman Sees 1.2 Trillion Dollars of Hyperscaler Capex in 2027 as Amazon and Alphabet Outspend Cash Flow
The 5 largest US hyperscalers are set to spend 1.2 trillion dollars on artificial intelligence infrastructure in 2027, above the Wall Street consensus of 1.1 trillion dollars, according to a Goldman Sachs note reported by Bloomberg on 25 September. The second quarter filings of Amazon, Alphabet and Meta Platforms show what the current pace already costs. Together they spent 129.2 billion dollars on property and equipment in the 3 months to June, or 111.1 percent of the cash their operations generated, on our calculation. A year earlier the same ratio was 82.9 percent.
A 1.2 trillion dollar year, then a slower climb
The note, from a team led by Ryan Hammond, also said the companies would need annual AI revenue of about 300 billion dollars in the coming years to break even on the outlay.
A Goldman Sachs Research article published on 23 September, which quotes Ben Snider, the bank’s chief US equity strategist, fills in the path. The largest US hyperscalers are on track to spend 800 billion dollars this year, 94 percent more than in 2025. The bank’s equity analysts then expect 1.2 trillion dollars in 2027 and 1.4 trillion dollars in 2028. Spending keeps rising, but more slowly: both the consensus and the bank’s own analysts show hyperscaler capex growing at a slower rate in coming years.
| Year | Hyperscaler capex | Basis |
|---|---|---|
| 2026 | $800bn | On track, up 94% on 2025 |
| 2027 | $1.2tn | Forecast |
| 2028 | $1.4tn | Forecast |
Estimates for the largest US hyperscalers from the bank’s research article of 23 September 2026. The Wall Street consensus for 2027 is 1.1 trillion dollars, per the Hammond team’s note as reported on 25 September.
The spending now runs ahead of operating cash
Amazon’s purchases of property and equipment rose 68.4 percent from a year earlier, on our calculation, to 54.2 billion dollars, against 45.4 billion dollars of cash from operations. Alphabet doubled its outlay to 44.9 billion dollars while operations brought in 39.1 billion, which left the Google parent with negative free cash flow of 5.9 billion dollars in the quarter, after 10.1 billion in the first quarter and 24.6 billion in the fourth quarter of 2025. Meta stayed just inside the line, with 30.1 billion dollars of property and equipment purchases against 31.9 billion of operating cash; after a further 962 million dollars of finance lease payments, its free cash flow was 784 million dollars, down from 8.5 billion a year earlier.
| Company | Equipment purchases Q2 2026 | Operating cash flow | Share of cash flow |
|---|---|---|---|
| Amazon | $54.2bn | $45.4bn | 119.4% |
| Alphabet | $44.9bn | $39.1bn | 115.0% |
| Meta | $30.1bn | $31.9bn | 94.5% |
| Combined | $129.2bn | $116.3bn | 111.1% |
Equipment purchases are purchases of property and equipment as reported in each company’s cash flow statement for the quarter ended 30 June 2026; Meta’s 962 million dollars of finance lease principal payments sit outside this line. Ratios are our calculation. A year earlier the ratios were 99.0 percent for Amazon, 80.9 percent for Alphabet and 64.7 percent for Meta.
Across the 3, purchases of property and equipment rose 81.6 percent from the second quarter of 2025 while operating cash flow rose 35.5 percent, on our calculation. Alphabet has already gone to the equity market: in June it raised 49.6 billion dollars net through Class A and Class C shares and mandatory convertible preferred stock, earmarked for general corporate purposes including capital expenditure to scale AI infrastructure and global compute. Amazon’s free cash flow over the past 12 months swung to an outflow of 7.6 billion dollars from an inflow of 18.2 billion, which the company attributes mainly to a 66.1 billion dollar rise in net property and equipment purchases, primarily for AI.
| Company | Q2 2025 | Q2 2026 | Change |
|---|---|---|---|
| Amazon | $32.2bn | $54.2bn | +68.4% |
| Alphabet | $22.4bn | $44.9bn | +100.1% |
| Meta | $16.5bn | $30.1bn | +82.1% |
Purchases of property and equipment, quarter ended 30 June, from each company’s second quarter 2026 release. Changes are our calculation.
Cloud revenue grows fast, but it is not AI revenue
Amazon Web Services grew 37 percent to 42.2 billion dollars, which chief executive Andy Jassy called its fastest growth in 18 quarters, and its operating income rose to 16.6 billion dollars from 10.2 billion, a margin of about 39 percent on our calculation. Jassy said the company’s AI and chips businesses had each passed run rates of more than 25 billion dollars. Google Cloud grew faster still, up 82 percent to 24.8 billion dollars, and its operating margin widened to 35.6 percent from 20.7 percent a year earlier, on our calculation.
Cloud revenue is a broader measure than AI revenue, and the break-even bar in the note is 300 billion dollars a year of AI sales across the group.
What it means for S&P 500 earnings
Almost half of S&P 500 earnings per share growth in 2026 comes from AI investment, according to the article, as the money passes through chipmakers, hardware suppliers, industrial firms and utilities. Index earnings per share grew 51 percent in the second quarter and 26 percent over the past 4 quarters, against an average 4 quarter growth rate of 7 percent over the past 30 years.
The article expects that tailwind to turn into a marginal drag in 2028, with the hyperscalers’ depreciation charges climbing as spending growth slows. It also puts a figure on the uncertainty: a 250 billion dollar surprise in hyperscaler capex next year, in either direction, would move S&P 500 earnings growth by roughly 6 percentage points the same way. Memory producers are earning gross margins of about 80 percent, more than double their historical average, a boost the article expects to fade, and large technology companies booked roughly 150 billion dollars of unrealized gains on private company stakes in the second quarter, equal to 12 percent of index earnings. Alphabet’s own release showed a net gain of 98.0 billion dollars in other income, primarily net unrealized gains on its equity securities.
The bank’s strategists forecast index earnings per share of 415 dollars in 2027 and 460 dollars in 2028, growth of about 11 percent in each year, and a 12 month target of 8,700 for the S&P 500 from 7,764 on 21 September, a rise of 12.1 percent on our calculation. The forward price to earnings ratio has fallen to 19 times from 23 times a year ago, matching its 10 year average, and the article says near-term valuations show no hint of a bubble because prices have not kept pace with earnings.
Why it matters: Amazon and Alphabet are spending more on property and equipment than their operations generate, and Alphabet has raised new equity with capital expenditure among its stated uses. The bank’s research attributes almost half of S&P 500 earnings per share growth this year to AI investment and puts the sensitivity at roughly 6 percentage points of index earnings growth for a 250 billion dollar miss or beat on next year’s capex, which is why the 2027 spending figure matters well beyond the hyperscalers themselves.
Outlook: Meta’s guidance for 2026 capital expenditure, including finance lease payments, is 130 to 145 billion dollars, narrowed on 29 July from 125 to 145 billion. With 50.9 billion dollars spent in the first half on that same basis, including 1.8 billion dollars of finance lease payments, that implies 79.1 to 94.1 billion dollars in the second half, on our calculation. The next quarterly reports will show whether hyperscaler spending is tracking the 800 billion dollar pace the bank sees for 2026, and whether cloud revenue growth, slower than the growth in property and equipment purchases at both Amazon and Alphabet in the second quarter, starts to catch up.
Sources: Goldman Sachs, Bloomberg, Amazon, Alphabet, Meta.
