Olympic greetings from Cedar Rapids and Kansas City. This was an earnings-driven week, with Google and Amazon reporting earnings. As a result of eye-popping capex guidance from both companies (Google = $175-185 billion in 2026, up from $91.5 billion in 2025; Amazon = $200 billion, up from $125 billion), it’s not surprising to see $500 billion in market capitalization hits for each company. The capital-light model of the previous era (1997-2022) is changing. Note: either of these figures would easily eclipse the combined 2026 capital budgets of the Telco Top Five.
The Fab Five has lost $625 billion so far in 2026, while the Telco Top Five has gained $52 billion thus far. Four of the five telco companies we track have increased value, and we anticipate T-Mobile will show impressive cash generation when they report results next Wednesday. Verizon remains inches ahead of AT&T given their impressive results discussed in the last Brief, and AT&T continues to deploy fiber to their footprint (which now includes fibered Lumen territories after their transaction closed this past week).
Back to the Fab Five for the moment. Shown below (and in the included file) are the changes to the net debt for each of the Fab Five through December:
Not included are long-term lease obligations which total $12.77 billion for Alphabet (+$1.1 billion growth over the year), $87.3 billion for Amazon (+$9.1 billion change), $17.4 billion for Microsoft (unchanged from the last 6 months), $22.9 billion for Meta (+$4.6 billion change). Apple does not break out long-term lease liabilities and we assume that it is not a material part of their balance sheet.
Since Amazon’s long-term lease obligations include those facilities that support their core retail business, it’s safe to assume that there was $9-10 billion growth in this category for the Fab Five. Said differently, net debt a year ago was negative $269 billion, and twelve months later is now $276 billion with the $7 billion in negative net debt growth offset by $9-10 billion in long-term lease liabilities.
In the meantime, these five companies spent over $400 billion in capital expenditures over the last 12 months. With basically no change in net debt, operating cash flows (and debt raises) covered a $400 billion budget.
This is not 1999. Not even close. The heartburn is coming from institutional shareholders who believe that spending money on AI infrastructure is a fool’s errand (vs more predictable returns like dividends and share buybacks). While this is nuanced, let that reality sink in – shareholders (Bezos, Brin/Page, Zuckerberg the three most prominent) would rather spend on advancing technology than increasing share price through traditional capital return policies. That founders trio has made a decision for each of their companies that this AI thing is real and that there is no alternative but to invest.
The next 24-36 months will give investors an answer, and the value of four of the Fab Five is at risk. Right now, capital is flowing out of the Fab Five (except Apple) and into “safer” investments. We think that tide will change by the end of 2026.
File is below. Pls send all comments to [email protected].