It was a huge day for Megacap earning, with META -8% on better top line results but (much) higher expenses and despite another material increase in forecast capex (this could be a major problem if even Mag 7s forecasts are no longer sufficient to keep the stock price tide rising), GOOGL +5% on accelerating Revenue growth across all business lines, and MSFT -2% on generally in-line results, yet guidance during the call which was on the weak side.
Given the importance of hyperscaler spend for the AI trade, Goldman trader Peter Bartlett has highlighted the CapEx datapoints from tonight, which all point to continued robust investment flows.
1. META: raising FY25 CapEx guide and guiding to “significantly faster” expense growth in 26:
- “We currently expect 2025 capital expenditures, including principal payments on finance leases, to be in the range of $70-72 billion, increased from our prior outlook of $66-72 billion”
- “As a result, our current expectation is that capital expenditures dollar growth will be notably larger in 2026 than 2025. We also anticipate total expenses will grow at a significantly faster percentage rate in 2026 than 2025, with growth driven primarily by infrastructure costs, including incremental cloud expenses and depreciation.”
2. GOOGL: raising FY 25 Capex guide:
- “With the growth across our business and demand from Cloud customers, we now expect 2025 capital expenditures to be in a range of $91 billion to $93 billion.” note: prev guidance was for $85bn.
3. MSFT: CapEx including assets acquired under finance leases in quarter came in above street, at $34.9bn, higher than the estimate of $30.0bn, although pure capex came in lower than the $23.04bn expected, at $19.39bn; there was no capex guidance.
Here is the historical capex broken down quarterly.
And here are the annual historicals as well as 2025 projections.
Finally, this is what this chart looks like over a longer timeline, courtesy of Goldman:
One wonders how much longer will shareholders of these three tech giants willingly hand over cash that would have otherwise gone to them (as buybacks) to Jensen Huang instead (as capex), if the massive revenue that is projected to be generated from this spending frenzy never materializes.
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