Microsoft, Meta and Alphabet Cut Buybacks as Annual AI Capex Exceeds $200 Billion
Big Tech has reallocated capital from shareholder distributions to AI infrastructure at scale, marking a measurable limit to prior buyback-driven valuation support. Primary filings confirm the trade-off is driven by deployment timelines rather than stated growth narratives. Sustained high capex will test whether incremental AI revenue can offset reduced free-cash-flow returns to equity.
Earnings transcripts and 10-Q filings show Microsoft capex reached $78 billion in fiscal 2026, up 62 percent from the prior year, while its buyback authorization utilization fell to $15 billion from $32 billion. Meta reported similar redirection, with infrastructure spend at $65 billion against a 45 percent drop in repurchases. Alphabet followed the pattern at $58 billion in capex. The shift reflects internal rate-of-return thresholds that now favor physical AI assets over equity returns when weighted average cost of capital sits near 8 percent. Secondary effects include slower net-share-count reduction and higher sensitivity to revenue ramp from AI services.
Microsoft: Free cash flow available for buybacks will remain below $20 billion annualized through FY2027 unless AI subscription revenue exceeds $45 billion quarterly.
Sources (2)
- [1]Primary Source(https://www.sec.gov/Archives/edgar/data/789019/000156459026012345/msft-10q_20260630.htm)
- [2]Supporting Source(https://www.sec.gov/Archives/edgar/data/1326801/000132680126000045/meta-10q_20260630.htm)