The development of artificial intelligence is not yet self-sustaining. Even though major tech firms have placed enormous bets on AI, the latest earnings reports from Amazon, Meta and Alphabet (Google’s parent company) show that their AI-related spending is still being underwritten by the cash flows from their core businesses—online retail, digital advertising and enterprise software. That reliance is not necessarily a fatal flaw, but it is an important caveat.
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AI continues to put significant pressure on big tech finances
According to their most recent financial statements, all three companies experienced strains on free cash flow: their operations continue to generate sizable revenue, but the investments in AI infrastructure have temporarily reduced the liquidity those companies have available.
Amazon led the group in negative free cash flow, posting an outflow of $42.4 billion, followed by Alphabet with $9.07 billion and Meta with $2.12 billion. Yet those headline figures don’t tell the whole story. Beyond the heavy AI spending, each firm is also facing a slowdown in its primary businesses. Amazon’s online sales grew just 2% year over year to about $68.47 billion, a trend that helps explain why the company has planned capital expenditures of roughly $220 billion for fiscal 2026.
Despite weaker performance in parts of its legacy business, Alik García, deputy director of equity analysis at VALMEX Casa de Bolsa, says Amazon can lean on other parts of its ecosystem—such as its in-house Trainium chips—and that AI-related margins are improving faster than traditional margins did at a comparable point in time.
Meta, meanwhile, reported a 26% increase in its advertising vertical, bringing ad revenue to about $63.1 billion. That growth was tempered by guidance to raise capital spending from $135 billion to $145 billion, while S&P Global Ratings projects capital expenditures could accelerate further to between $225 billion and $252 billion. That outlook prompted S&P to adjust Meta’s rating from AA-stable to AA-negative, citing uncertainty around the company’s high capital intensity and questioning its ability to monetize AI investments effectively.
Google has felt the effects of the transition perhaps most acutely. Search revenue rose 12% year over year to roughly $63 billion, but that figure fell short of the $64.96 billion analysts had expected and marked the third consecutive quarter of decelerating growth.
Although Google Cloud expanded rapidly—reporting growth of 103%—the softening in Search has raised concerns that AI-powered conversational platforms such as ChatGPT, Claude and Google’s own Gemini could be diverting users away from traditional search queries by allowing people to get straightforward answers through chat interfaces.
Jordan Klein, a tech analyst at Mizuho, warned after Google’s report that “this raises fears around AI and agent management, which is taking share from Search and YouTube.” Forrester analyst Tracy Woo added that the core issue is not only the performance of these companies’ flagship businesses but the risk that future AI spending could outpace the cash generation those franchises will be able to provide to fund it.
García argues that slower Search growth due to users trying out new tools is an anticipated risk and one Alphabet is addressing. He notes that AI Mode monetizes less than conventional search, but much of the recent slowdown can be attributed to foreign-exchange effects and one-off items. Google is broadening AI Mode advertising into additional countries, and for now searches are growing at their fastest pace in five years; most queries handled in AI Mode appear to be incremental, he says.
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Not all market watchers view the cash outflows as an immediate alarm. Cristopher Ballard, director at Check Capital Management, pointed out that despite negative free cash flow readings, these numbers are modest relative to each company’s overall revenue.
Even with net cash outflows, the three firms continue to report healthy operating income. In Q3 2026, Amazon’s operating income was about $28.1 billion—still below its negative free cash flow of $42.4 billion—while Meta posted operating income of roughly $12.99 billion versus a negative free cash flow of $2.12 billion, and Alphabet reported operating income near $41 billion against a negative free cash flow of $9.07 billion.
Ballard contrasts these large, diversified technology companies with pure-play AI labs such as OpenAI and Anthropic, which remain unprofitable and burn large sums on infrastructure. The major tech firms, he says, have established financial structures and access to capital that allow them to borrow short-term to fund long-term AI investments. “They’re taking on short-term debt to invest in the future,” he said. “I think that’s fine, and they’re doing it responsibly.”
García emphasizes that while AI initiatives do draw down cash and compress some margins in established businesses, they do not generally erode revenue—and in many cases, AI is boosting top-line performance. He points to Meta, where AI-driven improvements in recommendations and targeting helped ads grow 26% and raised price per ad unit by about 14%. At Amazon, external shopping agents haven’t harmed ad revenue; the company expects ads to grow between 15% and 19% in the fourth quarter. According to García, “the only clear case of cannibalization is Google.”
In short, while AI is creating significant short-term pressure on free cash flow for the industry’s biggest players, their core businesses still generate meaningful operating income, and analysts argue that their balance sheets and access to capital make the current strategy manageable as they invest in AI’s future.
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Lucas Monroe tracks the latest trends in mobile and 5G innovation. His work spans hardware analysis, telecom breakthroughs, and ecosystem development in next-gen connectivity.