By: Russ Kamp, CEO, Ryan ALM, Inc.
I’ve begun producing a roughly weekly update on AI financing given the incredible fundraising that is occurring through the debt markets. Here is some perspective on the latest comings and goings.
The important AI funding development isn’t simply that AI spending remains enormous, as it clearly does. However, investors are now rewarding companies that can fund that spending from cash generation and those that don’t get severely penalized.
Microsoft provided a positive story, reporting that Azure growth was 48%, quarterly revenue was $92.3 billion and, most importantly, $18.6 billion of free cash flow or roughly $10 billion above expectations. However, Microsoft still spent $45.2 billion on capex during the quarter and expects Azure growth to continue to accelerate. As a result, Microsoft’s shares rose more than 2% after the announcement.
Then there was Alphabet, which produced similar results, but the market’s reaction was quite different. Alphabet generated spectacular Google Cloud growth with revenue up more than double to $30.7 billion and backlog order revenue at $561 billion. Yet quarterly free cash flow was negative $9.1 billion, as AI and cloud investment continued to surge. Alphabet also expects capex to finish 2026 at between $195–$205 billion. They are also projecting that spending will increase substantially again in 2027. Unlike Microsoft, the market’s reaction was far less supportive, as Alphabet’s shares declined nearly -13% yesterday. The loss removed nearly $500 billion of market cap.
Regarding the debt markets, Microsoft raised roughly $25 billion in its first U.S. bond offering since 2017. Demand exceeded $100 billion, and the offering spans maturities from two to 40 years. Given that Microsoft remains free-cash-flow positive, it shouldn’t be surprising that Microsoft’s 40-year tranche was reportedly priced at only about 105 basis points over Treasuries, versus roughly 130–140 bps for comparable long bonds from Alphabet, Meta and Oracle. Clearly the bond market is still extremely willing to finance AAA-quality AI investment at relatively modest spreads.
Beyond Microsoft, the scale of AI-related borrowing remains incredible. FTSE Russell reports that Amazon, Alphabet, Meta, Microsoft and Oracle had already issued $218.1 billion IG debt by early October, which is more than double the $107.3 billion issued during all of 2025.
Speaking of negative free cash-flow, Amazon reported that trailing-12-month free cash flow had swung to -$42.4 billion, following Q3 capex of $77.3 billion, which exceeded expectations by roughly $20 billion. Amazon still expects that spending will be meaningfully more in 2027. Amazon shares are currently down about 3.3%.
Lastly, Intel, a second-order AI play, reported yesterday’s Q3 results in which they announced that Intel’s Data Center and AI revenue jumped 78% year-over-year to $7.3 billion. However, it remains a secondary source of company revenue. The balance of the business missed expectations and the stock is currently down -28.7% today!
