Citi's latest forecast anticipates that Alphabet, Meta, and Amazon will collectively allocate $801 billion for capital expenditures by 2027. This projection marks significant increases in investments $308 billion for Alphabet, $205 billion for Meta, and $288 billion for Amazon representing rises of approximately 21%, 22%, and 12% respectively from previous estimates. The bank shows that this capital injection is strategically aimed at enhancing artificial intelligence infrastructure rather than indicative of financial distress.
According to Citi, the anticipated spending levels will push all three firms into negative free cash flow territory during both 2027 and 2028. Such a scenario is uncommon for companies generating hundreds of billions of dollars in annual revenue. The firm notes that this aggressive investment focus is driven by ongoing solid demand for AI computational capabilities.
Projected growth in cloud services is notable, with Citi estimating that Google Cloud Platform's revenue will reach $190 billion by 2027, reflecting a 68.5% year-over-year increase for Q2 2026. For the first time, the forecast includes revenue from Google’s Tensor Processing Units, contributing an estimated $62 billion to the 2027 figures. Similarly, Amazon Web Services is expected to experience a 32.5% growth in Q2 2026, accelerating to 40% in 2027, spurred by increased AI adoption and higher computing capacity.
In addition to cloud advancements, Citi reports improved prospects in digital advertising and e-commerce, based on insights from the Cannes advertising festival. The bank anticipates that Q2 results will surpass Wall Street expectations for all three firms. However, not all analysts share the same optimism. CNBC's Jim Cramer indicated that the recent tech rally appears more sentiment-driven rather than fundamentally supported.
Alphabet shares experienced a bounce of over 3% following Warren Buffett's endorsement of a personal investment in the company through Berkshire Hathaway, alleviating some concerns regarding its AI expenditure. Meta and Amazon also saw increases of around 3%, though Cramer expressed skepticism regarding Amazon's ability to demonstrate returns on its AI investments. Microsoft gained approximately 2.5% following positive projections from Citi regarding its Copilot and Azure offerings entering fiscal 2027.
This material is informational and should not be considered financial advice.
