Chart of the week: hyperscalers spending forecasts still rising

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The chart below shows the forecast aggregate capital spending of the five main US data centre hyperscalers – Microsoft, Meta, Amazon, Alphabet and Oracle. We don’t pretend to know the potential profitability that will be generated by the investments that they are making. But we do see that the groups are generating higher than forecast revenue growth in their cloud services (34% for Alphabet and 25% for Microsoft in Q3) and related businesses (Meta revenue was up more than anticipated at 26%), with high margins. The calendar Q3 2025 results commentary indicates that they believe they are still capacity constrained. Hence capital spending forecasts are still increasing.

Over the last 12 months forecast 2025 and 2026 capital spending for the group has increased 50% and 60%, respectively. 2026 forecasts have increased 25% since the end of Q2 and will now increase again, which means accelerating growth. While hyperscaler shareholders may suffer some near-term indigestion related to increasing planned capital expenditure, the aggregate capital expenditure of the group (and all the individual companies except Oracle) is forecast to be well covered on internally generated cash flow. Circumstances could change, but accelerating capex growth with relatively low funding risk seems an attractive background for the infrastructure suppliers.
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