Combined quarterly depreciation charges for Meta, Microsoft, and Alphabet have surged from $8 billion to $22 billion and are projected to reach $30 billion by late 2026—transforming these companies from asset-light software businesses into capital-intensive infrastructure operators.
Bloomberg data reveals the hidden cost of AI infrastructure ambitions. While headlines focus on revenuegrowth and AI capabilities, depreciation charges tell a different story. Every data center, every GPU cluster, every cooling system must be written off over time. The $375 billion annual AI infrastructure spending creates 5-7 years of earnings pressure as these assets depreciate. What once were high-margin software companies now carry balance sheets resembling industrial firms.
The Analysis
The depreciation trajectories differ by company strategy. Alphabet leads with charges growing from $4 billion to over $12 billion quarterly, reflecting massive cloud and AI infrastructure expansion. Microsoft follows at $9 billion quarterly, driven by Azure’s data center buildout. Meta’s growth appears more modest—rising from $1 billion to $5 billion—because it lacks external cloud customers to justify infrastructure at competitorscale. The financial implications compound: Meta and Microsoft face projected negative free cash flow in 2026 after shareholder returns. These aren’t theoretical concerns; they directly reduce reported earnings.
What This Means
Big Tech has placed a strategic gamble that AI revenue will justify infrastructure investment. If AI monetization materializes, depreciation becomes evidence of prudent capital allocation. If not, $30 billion quarterly becomes proof of the largest capital misallocation in technology history. Investors must recalibrate expectations—these companies no longer operate on software economics. Competitors face a different challenge: matching this infrastructure spending or accepting permanent disadvantage.
Key Takeaway
The AI era transforms tech giants from asset-light to capital-intensive. Whether $30 billion quarterly depreciation represents investment or waste depends entirely on AI revenue that hasn’t yet arrived.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
