MENU

Hyperscalers Plan to Live Up to Their Name

Hyperscalers Plan to Live Up to Their Name

Jeff Buchbinder | Chief Equity Strategist

Last Updated: February 12, 2026

Additional content provided by Brian Booe, Associate Analyst, Research.

Capital markets have faced quite an array of moving pieces over the last couple of weeks, ranging from equity market rotation dynamics, volatile metals and commodity price action, geopolitical flare-ups, global central bank decisions, and high-profile earnings. Focusing on earnings, the five U.S. firms dubbed as data center and artificial intelligence (AI) hyperscalers — Google-parent Alphabet (GOOG/L), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Oracle (ORCL) — recently reported broadly upbeat quarterly results. But it was their spending plans that lived up to the hyperscale moniker and drew the spotlight.

As a result of the hyperscalers’ continued jockeying for dominance in the intensifying AI race, combined capital expenditures (capex) from the five firms are expected to exceed a staggering $600 billion in 2026, predominantly earmarked for data centers and the necessary tools to operate them. META announced a 79% expected jump in spending to roughly $125 billion just a week before GOOG/L unveiled plans to spend around $180 billion. Nonetheless, it didn’t take long for these massive outlays to be bested by a $200 billion capex forecast from AMZN just 24 hours after Alphabet’s report. Plus, the median consensus forecasts from Bloomberg project MSFT to spend around $105 billion for the fiscal year ending in June. The estimated 60% combined increase from a year ago rattled investors with some sticker shock, exacerbating a skid in big tech shares sparked by ongoing rotation dynamics away from the index heavyweights. The bar to clear for sufficient AI returns to satisfy investors keeps getting higher.

Hyperscaler Capex Now Expected to Top $600 Billion

This bar chart highlights the capex of hyperscalers.

Source: LPL Research, Bloomberg 02/10/26
Disclosures: Based on median 2026 estimates for fiscal year ends. Estimates are subject to change and may not materialize as expected, and past performance is no guarantee of future results.

But One Was Not Like the Others

Although META was an exception to the risk off response, and taking a look under the hood free cash flow was likely a primary factor in allowing the Facebook and Instagram parent to hold up a bit better than its peers. Without diving too deep into financial statement analysis, META’s trailing 12-month free cash flow balance was the only one of the five hyperscalers to gain ground from the prior quarter. While the social technology firm’s capex for last quarter and the year ahead both surprised to the upside, the rise in cash flow balances underpinned Wall Street’s confidence that it is on solid footing for the projected outlays. Outside of META, the remaining four firms all posted a decline in cash flow, kindling jitters that elevated 2026 spending guidance may shorten the timeline on when some (if any) begin to bleed cash — especially considering some (including GOOG/L and ORCL) have already begun to dip into credit markets to fill in funding gaps. Low leverage has been a key theme of the AI spending cycle, and while these behemoths have capacity to take on debt, potentially dwindling cash flows will place more scrutiny on the metric.

Free Cash Flow Dip Likely a Main Factor in Investor Jitters

This line chart provides the current cash flow levels for hyperscalers.

Source: LPL Research, Bloomberg 02/10/26
Disclosures: Past performance is no guarantee of future results. Free cash flow is calculated by subtracting capital investment from operating cash flow.

Key Takeaways

As seen this earnings season, the outlook for free cash flow will be key in gauging the health and stability of the AI investment cycle. And hyperscalers may be forced to walk a smaller capex tight rope as too little could signal less confidence in the AI outlook, while too much could impair shareholder value. Nonetheless, consensus forecasts still reflect positive, but volatile, cash flow growth ahead.

Some signs of eroding returns on invested capital (ROIC) have also caught investors’ attention. While this is noteworthy and should be monitored, it may not be doom-and-gloom. ROIC has also been volatile and historically has proven to front-run the fruits of the investment. For example, ROIC declined at the start of the AI buildout in 2023, but profits just hadn’t caught up yet.

We expect additional bouts of volatility for big tech and the broad market as the AI debate continues. But based on strong demand and adoption, the AI theme is on solid footing for now, in our view. For markets more broadly, the elevated spending will likely be a boon for earnings across the S&P 500 (as well as many multinational and international companies) as hyperscalers and beyond pay for the materials and industrial equipment associated with the data center buildout. Plus, expected productivity gains from AI development are also expected to be supportive for corporate America and the overall U.S. economy. Wall Street continues to forecast capex for the entire AI industry to reach $1 trillion by 2030, and as a bonus knock-on effect of the build out, some data centers, such as META’s facility in Odense, Denmark, heats 6,900 homes, providing cheaper heating and decarbonization.

Important Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

Bonds are subject to market and interest rate risk if sold prior to maturity.

Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings of commodities will result in significant volatility in an investor’s holdings.

This research material has been prepared by LPL Financial LLC.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

For Public Use – Tracking: #1064234

Source

Steve King

Certified Public Accountant with Meyerowitz and King

Steve has been working in the accounting and tax field for over 20 years.  He is passionate about working with families and businesses guiding them through tax and financial issues.  He specializes in individual, partnership, corporate, and trust taxation. Steve is an EY alumni where he began his career after graduating from the University of Louisville.  Prior to co-founding Meyerowitz and King, PLLC Steve worked in the tax and financial areas of three global organizations. When working with his clients, if he sees they could benefit from the services of a financial planner, Mr. King refers his clients to the Louisville Financial Group.

One of Steve’s key responsibility is preparing individual returns of executives with diversified investments, various K-1’s, closely held investments which often create taxation issues and significant tax planning.

Steve devotes a significant amount of time serving on several boards and committees.  He has served on committees with the KY Society of CPAs, several boards for non-profits, and is treasurer of his local high school booster club.  He has also lectured on various tax and financial topics in the community.

Steve and his wife, Stacey, have been married since August 1997 and have two children, Justin and Jason.  Steve’s hobbies include spending time with his family, volunteering, traveling, and reading.

The tax services offered by Mr. Meyerowitz and Mr. King are separate and unaffiliated with LPL Financial. The CPA Strategic Alliance allows Mr. Meyerowitz and Mr. King to offer clients the opportunity to access resources and services provided by Louisville Financial Group. Mr. Meyerowitz and Mr. King are members of and work for Meyerowitz & King, PLLC, which is a separate and independent business and legal entity from Louisville Financial Group, LPL Financial, Mr. Manthey, and Mr. Durham. Mr. Meyerowitz and Mr. King are not partners, owners, managers, and/or members with Mr. Manthey and/or Mr. Durham nor with Louisville Financial Group or LPL Financial.

Victor M. Meyerowitz

Certified Public Accountant and Tax Attorney with Meyerowitz and King

He is a member of the Kentucky Bar Association, and the Kentucky Society of Certified Public Accountants.

He earned his Baccalaureate in History from the University of California in Irvine (1991), his Juris Doctor from Tulane Law School (1994), and his accounting credentials from the University of Louisville (1999). He is a member of the Phi Beta Kappa academic fraternity, graduated cum laude, and was recognized by the Kentucky Society of CPAs for having passed all four parts of the CPA examination on the first attempt.

Mr. Meyerowitz has been an Advanced Certified QuickBooks Pro Advisor since 1999.

Mr. Meyerowitz focuses his practice on helping clients with their tax and accounting needs. When working with his clients, if he sees they could benefit from the services of a financial planner, Mr. Meyerowitz refers his clients to the Louisville Financial Group. He has represented numerous clients before the IRS and various State & Local Tax Agencies. His experience includes resolving complex tax problems and also managing Income, Payroll, and Sales Tax Audits. A significant amount of his time is spent helping closely held businesses with business consulting. This includes choosing the correct entity for tax purposes, being properly trained in using accounting software, implementing proper accounting procedures and safeguards, understanding financial statements, and advising on tax benefits to help make important business decisions.

In addition, prior to starting Meyerowitz & King, his experience included working with small and large businesses as a controller/CFO and as a tax consultant in a major global accounting firm. He has also published articles in the newspapers and has lectured numerous times at educational seminars.

Mr. Meyerowitz is an active member of the US Masters Swimming and has been ranked in the top 20 in the United States for his age group in the 1500m freestyle. He has also been the Cross Country Head Coach, winning numerous State Titles, at Dunn Elementary School, Kammerer Middle School, and Ballard High School.

Mr. Meyerowitz has been married to his lovely wife Sandra since 1997 and together have two wonderful children.

Mr. Meyerowitz has been a Licensed Registered Representative in Investments since August 21, 2003

The tax services offered by Mr. Meyerowitz and Mr. King are separate and unaffiliated with LPL Financial. The CPA Strategic Alliance allows Mr. Meyerowitz and Mr. King to offer clients the opportunity to access resources and services provided by Louisville Financial Group. Mr. Meyerowitz and Mr. King are members of and work for Meyerowitz & King, PLLC, which is a separate and independent business and legal entity from Louisville Financial Group, LPL Financial, Mr. Manthey, and Mr. Durham. Mr. Meyerowitz and Mr. King are not partners, owners, managers, and/or members with Mr. Manthey and/or Mr. Durham nor with Louisville Financial Group or LPL Financial.

Bradley S. Manthey

Managing Wealth Advisor, LPL Branch Manager, Managing Principal

Since graduating from the Kelley School of Business at Indiana University with a B.S. in Finance, Brad has been guiding clients through individualized plans to pursue their financial goals.

Brad is proud to be an independent advisor, which is why he affiliates himself with LPL Financial. The firm serves as an enabling partner, supporting his goal of protecting and growing his client’s wealth. Brad believes that each client deserves a thorough and prompt response to every question. He takes personal interest in the individuals and families he advises, and he helps each one develop a comprehensive financial plan that will help them move toward their goals and dreams.

Outside his professional life, Brad strives to serve people through a strong commitment to his church and community. He was involved in the planting of Revolution UMC, where he served as the Finance Chairman and leader of many small group studies. He proudly served on the Board of Pensions to the KY Annual Conference of the United Methodist Church, and is currently a member of Southeast Christian Church, where he and his wife volunteer as pre-marital mentors. He actively supports Go Ministries, Inc., Bernheim Forest and The Parklands. Happily married for 30+ years to his wife Lori and proud father of their son, Carter. His hobbies include golf, hiking and reading.

Contact
ACCOUNT VIEW

M. Brent Durham

President, LPL Financial Advisor

As President and co-founder of the Louisville Financial Group, Brent has been in the financial services field since 1999. After beginning his career at one of the largest financial planning firms in the United States, he decided to start his own wealth management firm along with his partner Brad Manthey. His background includes a Bachelors of Science Degree in Finance and in Economics from Campbellsville University.

After talking with several clients in regards to their goals and their previous financial representatives, Brent developed a principle in what he believed he would want in an advisor. As a financial representative, Brent has always adhered to the principle that his clients trust, financial well-being, and life goals are as important to him as they are to his clients. His belief in this principle has led him to develop a goal oriented, on-going investment planning process that keeps him in constant contact with his clients.

Outside his professional life, Brent enjoys being outside and spending time with his family. Brent and his wife Linda enjoy traveling to new destinations. Their two sons are now young adults. Christian shares a love of history and travel, while Owen is always up for a round of golf with his dad. Brent is also a swim fan, cheering Owen and his teammates on with the University of Cincinnati.