Amazon and Alphabet plan to spend big on AI in 2026. Alphabet will invest $175-185 billion, while Amazon plans to spend $200 billion. Both companies are addressing increased demand for compute power, especially for AI projects. This spending will impact their free cash flow, potentially causing it to decline or go negative.

Alphabet may avoid negative free cash flow in 2026 despite increasing capital expenditures. It generated $165 billion in operating cash flow in 2025 and continues to grow its cloud computing business. On the other hand, Amazon’s operating cash flow of $140 billion may not cover its planned $200 billion in capital expenditures.

Both companies have significant backlogs, with Alphabet at $240 billion and Amazon at $244 billion. Demand for AI products is driving these backlogs, showcasing the potential for strong returns on their invested capital. Despite the stock market’s reaction to their spending plans, both Alphabet and Amazon are well-positioned for long-term growth.

Investors should consider the impact of massive AI spending on Amazon and Alphabet’s financial health in 2026. While their balance sheets show strength, the companies may see a decline in free cash flow. However, the potential returns on their investments in AI technology could lead to future growth and profitability.

Read more at Yahoo Finance: This Key Metric for Amazon and Alphabet Will Take a Huge Hit in 2026 Thanks to Massive AI Spending. Here’s What It Means for Investors.