Evercore

Tech AI Buildout Drives Cash Burn, Rising Memory Costs

Major technology companies are facing mounting financial pressure as aggressive AI investments push capital spending and strain cash flows. Goldman Sachs projects AI spending among megacaps will reach $765 billion this year and approach $1.2 trillion by 2027. Amazon raised its 2026 capital expenditure forecast to $220 billion and reported negative trailing-12-month free cash flow of $7.6 billion. Meta disclosed a 91% drop in cash generation year-over-year, and Alphabet said cash flow turned negative for the first time on record. A tight memory market and surging prices — exacerbated by a small set of vendors — are elevating costs for hyperscalers and consumer-device makers alike; Micron was singled out as a key memory supplier. Investor reactions to earnings and forecasts have been mixed, reflecting skepticism about whether heavy AI capex will deliver acceptable returns.

Apple earnings split Wall Street amid supply, AI headwinds

Apple reported fiscal third-quarter revenue of $109.42 billion, slightly above LSEG-polled estimates of $108.65 billion, with iPhone, Mac and wearables outperforming while iPad and Services revenue missed expectations. The stock fell roughly 8% after Apple gave weaker-than-expected guidance for the current quarter, forecasting revenue growth of 9–11% versus LSEG expectations of 12%. CFO Kevan Parekh cited parts supply constraints that could particularly affect iPhone revenue, and several banks and research firms flagged high memory costs, supply-chain prioritization for AI, and decelerating Services as near-term headwinds. Analysts were divided: some trimmed price targets and downgraded near-term outlooks while others highlighted Apple's strong free cash flow, upcoming iPhone and Siri AI catalysts, and potential for Services recovery. Major broker notes from UBS, Barclays, JPMorgan, Goldman Sachs, Morgan Stanley, Citi, Bank of America, Evercore ISI, Baird, Wells Fargo and Melius Research were summarized.

Amazon Q2 Earnings Focus on Cloud and Capex

Amazon is scheduled to report second-quarter 2026 results after the bell on July 30, with investors focused on cloud growth and capital expenditures. Street estimates compiled by LSEG expect $1.82 in EPS and $196.47 billion in revenue, with AWS revenue of about $40.54 billion and advertising revenue of $19.43 billion. Amazon reiterated February guidance for roughly $200 billion in 2026 capex, while some analysts (including Morgan Stanley) expect that figure to rise amid rising AI-related infrastructure demand. The company reported $44.2 billion in capex in Q1 and Q2 capex is expected near $49.3 billion per FactSet data. Amazon continues cloud and chip partnerships with AI providers including OpenAI, Anthropic and Meta.