J.P. Morgan: Cloud giants plan to nearly double fourth-quarter capital spending as AI infrastructure investment extends into 2027

How large is the fourth-quarter investment?

Based on capital expenditure guidance from Alphabet, Microsoft and Meta, JPMorgan estimates that the three companies’ combined spending in the fourth quarter of 2026 will be approximately 174 billion dollars, an increase of approximately 87 billion dollars, or 99%, year over year.
This growth comes against a backdrop of continued supply-side capacity constraints. The three companies’ statements on 2027 spending also led JPMorgan to expect the AI infrastructure investment cycle to continue.

Alphabet’s third-quarter capital expenditure was 51 billion dollars, up 114% year over year. The company maintained its full-year guidance of 195 billion to 205 billion dollars, implying fourth-quarter spending of 63 billion to 73 billion dollars, up 23% to 42% quarter over quarter.
Most of Alphabet’s capital expenditure in the first three quarters went to AI-related technical infrastructure, with approximately 65% allocated to servers and networking equipment and approximately 35% to data centers. The company said it would continue to bring capacity online to meet demand for cloud services, AI infrastructure and other products.
Meta’s third-quarter capital expenditure was 35 billion dollars, up 80% year over year. It raised its full-year guidance from 130 billion to 145 billion dollars in the previous quarter to 135 billion to 145 billion dollars, implying fourth-quarter spending of 49 billion to 59 billion dollars, up 41% to 70% quarter over quarter.

Microsoft’s capital expenditure for the quarter ended September 2026 was 45.2 billion dollars, including leases, up 10% quarter over quarter and 30% year over year. About three quarters went to short-lived assets, primarily CPUs and GPUs, and spending was also affected by rising memory and storage costs.
Delays in the delivery of some third-party capacity brought capital expenditure for the quarter slightly below plan. The company now expects spending of 170 billion dollars in calendar year 2026, up 44% year over year. On that basis, JPMorgan estimates fourth-quarter spending at 52 billion dollars, up 16% quarter over quarter.

Alphabet expects capital expenditure to grow significantly again in 2027, while Meta plans to continue investing aggressively. Microsoft expects infrastructure spending to remain high in the second half of fiscal 2027, based in part on new capacity coming online and the arrival of delayed third-party capacity.
Oracle expects capital expenditure to peak in fiscal 2027 to 2028 and decline in fiscal 2029. JPMorgan notes that quantitative visibility into the scale of 2027 spending remains limited, and that the companies’ statements mainly indicate an extended period of heavy investment.