Evercore ISI: In the AI spending boom, large cloud service providers are expected to experience "cash outflows," with only Microsoft(MSFT.US) likely to avoid the impact

According to Evercore ISI data, as artificial intelligence (AI) infrastructure spending expands rapidly, Microsoft (MSFT.US) is expected to be the only large cloud service provider among the “Big Seven” in U.S. stocks to achieve free cash flow growth by 2026.

Evercore noted that Amazon (AMZN.US), Google (GOOGL.US), and Meta Platforms (META.US) are expected to see a year-over-year decline in free cash flow in 2026. Another major cloud provider outside the “Big Seven,” Oracle (ORCL.US), is also projected to experience a decrease in free cash flow. In contrast, Microsoft’s free cash flow is expected to grow by 5% in 2026, while the other two tech giants in the group, NVIDIA (NVDA.US) and Apple (AAPL.US), are forecasted to achieve double-digit free cash flow growth.

These tech giants’ massive capital expenditures are expected to increase by 58% in 2026, surpassing $700 billion. In an investor report, Evercore analyst Amit Daryanani stated, “The question remains how long these mega-companies can sustain such investment levels, especially when free cash flow in some cases drops below zero. Looking at forward free cash flow multiples, Apple remains attractive within this group, trading at less than 30 times free cash flow for fiscal years 2026 and 2027, whereas the average valuation for the ‘Big Seven’ currently exceeds 95 times free cash flow.”

The analyst also pointed out, “Over the past three years, the combined capital expenditures of the ‘Big Seven’ plus Oracle accounted for about 40% or less of total operating cash flow, but by the 2025 calendar year, this ratio has risen to approximately 50%, and is expected to exceed 60% in 2026 and 2027. While AI-driven demand provides a compelling long-term investment rationale, the short-term consequences include weakening free cash flow, limited capital returns, and increased sensitivity to financing conditions. If debt becomes a more critical source of funding for infrastructure expansion, we expect investors’ focus to shift toward assets with lower capital intensity, emphasizing return on investment and capital allocation efficiency.”