Big Tech's AI Funding Strategies Revealed

Microsoft is funding its AI buildout almost entirely from cash flow, leaving $19.6 billion in free cash flow after covering its net capital expenses of $35.8 billion last quarter.

The company's operating cash flow was $55.4 billion, and it also spent $4.06 billion on share buybacks, up from $4.0 billion the year before, as well as $6.76 billion in dividend payouts, a 9.5% increase.

Total debt sits near $40.3 billion, but Microsoft's cash equivalents and short-term investments add up to $76.8 billion, providing ample reserves if cash flows ever turn negative.

Alphabet, on the other hand, is operating in red-ink mode and saw its free cash flow go negative for the first time since its IPO in 2004, at -$5.9 billion.

Despite this, Alphabet's balance sheet could easily support a few years of cash burn, with $126.8 billion of liquid reserves at the end of Q1, and trailing-12-month cash flows are still robust at $53.3 billion.