Chapter 7

Hyperscaler Capex

The valuation read left the case conditional on whether Meta's capital intensity is temporary. That question is answerable only against the two peers running the same build. In 2025 Alphabet and Amazon both raised capital spending at rates close to Meta's, and both saw free cash flow squeezed the same way — so the compression is an industry event, not a Meta-specific flag. Yet Meta carries the highest spend relative to its revenue base, funds it with the narrowest business, and is the only one of the three with no external cloud revenue earned on the same infrastructure.

The build is industry-wide

Meta is not spending alone. In 2025 all three of the largest U.S. AI-infrastructure builders roughly two-thirds-to-doubled their capital expenditure in a single year: Meta's purchases of property and equipment rose 87% to $69.7B [1], Alphabet's rose 74% to $91.4B [2], and Amazon's rose 59% to $131.8B [3]. The three together deployed roughly $293B of capex in one year.

Sources: Meta FY2025 10-K, Statements of Cash Flows [4]; Alphabet FY2025 10-K [5]; Amazon FY2025 10-K [6].

The cash-flow consequence was the same at each company. On a consistent basis — operating cash flow less gross property-and-equipment purchases — Meta's free cash flow fell 15% to $46.1B, Amazon's fell 77% to $7.7B, and only Alphabet's held flat at $73.3B because its operating cash flow grew fast enough (up 31% to $164.7B [7]) to absorb the step-up. The 37x price-to-free-cash-flow multiple that looked stretched for Meta on its own is, in context, the mildest compression in the group.

Sources: derived from each company's FY2025 10-K Statements of Cash Flows — Meta [8], Alphabet [9], Amazon [10].

A caveat on definitions: each company reports free cash flow slightly differently. Meta also subtracts $2.5B of finance-lease principal, giving a reported figure of $43.6B [11]; Amazon subtracts equipment sale proceeds, giving $11.2B [12]. The chart uses one consistent definition across all three so the comparison holds; the reported figures differ by rounding, not by story.

Meta carries the highest intensity on the narrowest base

Where Meta separates from the group is intensity. Capex consumed 35% of Meta's $201.0B of revenue in 2025 [13], against 23% at Alphabet (on $402.8B [14]) and 18% at Amazon (on $716.9B [15]).

Sources: derived from each company's FY2025 10-K income and cash-flow statements — Meta [16], Alphabet [17], Amazon [18].

Two things temper that reading. First, the revenue-share lens flatters Amazon: most of its $717B is low-margin retail, so capex looks light against a denominator that has little to do with the AI build. Measured against operating cash flow — the money the business actually throws off — the order inverts: Amazon reinvests 95% of its operating cash flow in capex, Meta 60%, and Alphabet 55%. Amazon is the company spending closest to its cash-generation ceiling; Meta and Alphabet retain a wider margin. Second, Meta's own guidance points the intensity higher still, not lower: 2026 capex is guided to $115-135B, roughly double 2025 and more than its entire 2025 consolidated operating income of $83.3B [19]. On the guided midpoint against 2026 consensus revenue near $253B, Meta's capex-to-revenue ratio would climb toward 50%.

Cheapest of the cohort, most concentrated bet

The value-relevant fact is that carrying the heaviest intensity has not made Meta the most expensive stock in the group — it is the least expensive. At the current price Meta trades near 28x trailing and 37x free cash flow; Alphabet trades near 33x earnings and 60x free cash flow, and Amazon near 34x earnings and several hundred times a free-cash-flow figure its own build has all but erased.

Sources: FY2025 10-Ks (revenue, capex, cash flow, cloud segment) for Meta [20], Alphabet [21] and Amazon [22]; trailing multiples derived from reported net income and current market data.

Meta also returned more of its cash to owners in proportion to what it generated. It paid out $31.6B in buybacks and dividends in 2025 [23]; Alphabet returned $55.8B [24]; Amazon paid out nothing — no dividend and no buyback in 2025 — while its free cash flow fell to near zero [25]. Two of the three fund the build and still return capital; Amazon reinvests everything.

The offsetting fact is what the spending buys, and here Meta's position is genuinely different. Alphabet and Amazon both run large third-party cloud businesses that rent the same class of compute to outside customers under contract. Amazon's AWS earned $128.7B of revenue at a $45.6B operating profit in 2025 [26], and carries roughly $244B of contracted future cloud revenue not yet recognized, with a weighted life of 4.1 years [27]. Alphabet's Google Cloud earned $58.7B at a $13.9B operating profit, growing 36% [28]. Meta has no such business. Its two reportable segments are Family of Apps and Reality Labs [29]; every server it builds is consumed internally, and the return on it must come from selling more or better-targeted ads to its own users, or from the metaverse and superintelligence ambitions that carry no disclosed payoff.

The depreciation wave is shared, and still ahead

The margin cost of these builds is largely in front of all three companies, because most of the 2025 spend is not yet running. Capex outran depreciation everywhere in 2025: Meta spent 3.7 times its property-and-equipment depreciation, Alphabet 4.3 times its $21.1B depreciation [30], and Amazon about 2.0 times its blended depreciation [31]. A capex-to-depreciation ratio above three tells you the depreciation line is set to rise for years as assets are placed in service — the same fixed cost that lands on the income statement whether or not the incremental AI revenue arrives. It is a cohort-wide phenomenon; it is heaviest, on this measure, at Alphabet and Meta.

The obligation side is harder to compare cleanly because each company defines it differently, but the direction is consistent. Meta disclosed $237.7B of non-cancelable contractual commitments at March 2026, up from $32.1B eighteen months earlier [32]. Alphabet reported $149.1B of purchase commitments and other contractual obligations at December 2025, most of it short-term [33]. Amazon states that its capex-related purchase obligations are generally cancellable [34] — its $244B backlog is contracted demand it will be paid for, the opposite of a spending lock-in. So on disclosed non-cancelable spend, Meta's commitment is both the largest and the fastest-growing, even before the leases-not-yet-commenced examined elsewhere in this report (AI and Reality Labs).

The read

Set against its two closest analogues, Meta's free-cash-flow compression is not a Meta problem — it is the shared cost of an industry-wide compute build, and Meta bears it while remaining the cheapest of the three on earnings and free cash flow and returning the most capital relative to what it makes. That is the reassuring half, and it matters for a buyer worried about paying a high-flyer price: the multiple that looked full in isolation is the most conservative in its peer group.

The unreassuring half is concentration. Meta runs the highest capex intensity of the cohort, on the narrowest revenue base, with 2026 guidance pointing higher still, and it is the only one of the three whose build earns no external, contracted cloud revenue to underwrite the spend. Alphabet and Amazon can point to paying customers renting the same GPUs; Meta's return has to be manufactured inside its own advertising funnel, plus ambitions it has not yet shown will pay. What would change this read is evidence that Meta's intensity is turning down toward the peer range while Alphabet's and Amazon's keep climbing — that would recast Meta from the heaviest spender to the disciplined one. The 2026 guidance points the other way for now.