CLOUD · T07
Will the average trailing-twelve-month ROIC of Microsoft, Alphabet, Amazon and Meta fall by the quarter nearest Q3 2027 versus the quarter nearest Q4 2024?
Massive AI capital spending is piling into balance sheets and depreciation schedules faster than AI revenue shows up, which could drag down returns on invested capital across the biggest cloud players.
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Return on invested capital falls
Returns fall as capital spending outpaces profit growth. Roughly $600-700bn a year in AI-related spending gets capitalized onto balance sheets with five to six year depreciation schedules, while new AI revenue ramps slowly and at thin, commodity-like pricing. Invested capital grows faster than after-tax operating profit, pulling the average ROIC of these four companies below its late-2024 level, and in a harsher version of this story, incremental returns slip under a roughly 10% cost of equity.
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The case against it
Returns hold steady or improve despite the spending surge. Cloud and AI revenue growth accelerates enough that profit keeps pace with or outruns the growing capital base. Companies may also stretch out depreciation schedules or lean more on leased, off-balance-sheet capacity, keeping reported figures flat or higher. Rising utilization could also lift operating margins, offsetting the larger capital footprint and leaving average ROIC at or above its late-2024 level by the 2027 comparison point.
1 voice
The questions
Settles Nov 9open
Will CoreWeave's capital spending stay at or above 215 percent of revenue next quarter?
Settles Dec 14open
Will Oracle's operating cash flow hit at least 100 percent of revenue next quarter?
Settles Dec 14open
Will Oracle's capital spending stay at or above 120 percent of revenue next quarter?
Settles Oct 28open
Will Microsoft's operating cash flow hit at least 58 percent of revenue next quarter?
Settles Oct 28open
Will Microsoft's operating cash flow hit at least 61 percent of revenue next quarter?
Settles Oct 28open
Will Microsoft's operating cash flow hit 64 percent of revenue in the quarter ending September 30, 2026?