JPMorgan: AI Giants' Earnings and Free Cash Flow Are Showing a Significant Divergence

TechFlow news, August 11, JPMorgan pointed out that the earnings and free cash flow of AI giants are showing a significant divergence. Represented by Google, Amazon, Microsoft, and Meta, large-scale cloud service providers' net income for the past 12 months has risen to approximately $599 billion, but free cash flow after deducting capital expenditure is only about $169 billion, widening the gap between the two to $430 billion; whereas at the end of 2023, both net income and free cash flow were still around $240 billion.

However, the reason is not weakening AI demand, but rather capital expenditure growing faster. JPMorgan expects AI-related capital expenditure to reach approximately $900 billion in 2026, and further exceed $1.2 trillion in 2027. A large amount of new cash is being reinvested into data centers, servers, GPUs, and network infrastructure, causing profit growth to temporarily fail to translate synchronously into free cash.

However, it is worth noting that AWS, Azure, and Google Cloud revenue and orders are still growing rapidly, indicating that AI monetization capabilities are improving. JPMorgan expects that except for Microsoft, the free cash flow of most large-scale cloud service providers it covers will remain under pressure in 2026-2027. (Jin10)