The Capex Cliff That Wasn't
Third-quarter results from the hyperscalers came in well above the bear case. The question is what year the bill comes due.
Coming into earnings season, the bear case on the largest cloud operators was a simple one: capital spending was running ahead of revenue attached to AI workloads, and the gap would eventually have to close on the revenue side or open on the cash-flow side.
Third-quarter results, in aggregate, did not validate that thesis. Combined AI-attributable revenue across the four reporting hyperscalers rose 62 percent quarter-over-quarter, and capital intensity, while elevated, fell modestly as a share of revenue. The interesting line item is the one for purchase commitments — the off-balance-sheet obligation to take delivery of accelerator inventory through 2028.
Tech Editor based in San Francisco. Covers AI infrastructure and the people building it.
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