Microsoft and Alphabet disclosed capital expenditure figures that fell short of analyst expectations during earnings reports Wednesday, signaling a potential shift in the rapid infrastructure spending that has characterized recent quarters across the technology sector.
Microsoft reduced its capex forecast for the year to $170 billion from $175 billion, while Alphabet maintained its guidance at $195 billion to $205 billion. CFO Amy Hood attributed delays partly to third-party GPU providers, which would defer some capacity availability until the first half of 2027. Alphabet’s finance chief similarly noted that external computing power came online only at the very end of Q3. The shortfall in capex guidance prompted shares of infrastructure providers CoreWeave, Nebius, and IREN to decline, along with Oracle, a major spender on AI infrastructure. Alphabet shares dropped approximately 10% in extended trading following the company’s miss on earnings and revenue, compounded by negative free cash flow exceeding $9 billion.
Despite the apparent caution, the broader AI infrastructure buildout shows no signs of slowing. Microsoft CFO Hood indicated that capital spending would accelerate in the first half of 2027 due to higher component costs and delayed deliveries. Industry projections forecast hyperscaler capex to exceed $1 trillion next year, with continued growth anticipated. Microsoft’s report received a positive reception from investors, as the company beat earnings and revenue expectations, with Azure cloud business sales growing 48%.
The emerging neocloud sector faces mounting challenges as infrastructure providers seek billions in capital but lack investment-grade credit ratings. Rising interest rates and concerns about debt loads have prompted lenders to withdraw from the market. Analytics firm Gartner predicted that 80% of neocloud companies will either merge or fail by 2030. Firmus, a neocloud backed by Nvidia, withdrew its planned initial public offering earlier in the month despite commitments from Meta and OpenAI.
Amazon is scheduled to report results Thursday, with Meta having previously indicated full-year capex guidance of $135 billion to $145 billion. Analysts note that delays from neocloud partners carry heightened significance given upcoming developments in the AI company sector, including Anthropic’s planned public offering and OpenAI’s stated likelihood of going public in 2027.
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