BNP Paribas analysts said hyperscalers are entering a new phase of aggressive AI spending, with Microsoft Corp (NASDAQ:MSFT) standing out for its cash flow resilience. At the same time, Amazon.com Inc (NASDAQ:AMZN) faces investor pressure over its surging capital expenditure plans.
Microsoft’s Cash Flow Holds Up As AI Spending Explodes
Analyst Stefan Slowinski said the Big 5 hyperscalers now expect to spend nearly $700 billion in capex this year, up about 65% year over year.
The analyst argued that Microsoft’s free cash flow remains the most resilient, while peers’ free cash flow trends toward negative territory.
He projected Microsoft’s FCF margin at roughly 22%, compared with about 5% or lower for others, positioning Microsoft as a more disciplined AI spender as return concerns grow.
Slowinski maintained an Outperform rating and a $659 price forecast, noting that Microsoft’s FCF remains the most resilient among its “Big 5” peers.
Azure Growth Stalls While Rivals Gain Share
Slowinski also pointed to a weakness.
Azure growth remains stuck in the high-30% range, with 365 Commercial Cloud running at about 14%, even as competitors see acceleration in core businesses, the analyst noted.
The analyst added that Alphabet Inc‘s (NASDAQ:GOOGL) Google, and Amazon gained cloud share versus Microsoft in the calendar fourth-quarter, each generating more than 70% incremental cloud revenue relative to Azure, despite Azure adding 1GW of capacity during the quarter.
Amazon Sell-Off Looks Overdone Despite Heavy Capex
Analyst Nick Jones said Amazon delivered a solid fourth-quarter 2025. Still, investors sold the stock after management issued lower-than-expected operating income guidance and signaled higher 2026 capex, pushing shares down about 11% after hours, a reaction he viewed as excessive.
The analyst highlighted bright spots, including Amazon Web Services backlog rising 22% sequentially to $244 billion, more substantial traction for AWS custom chips, continued retail momentum (including Amazon Haul and grocery), and robust advertising performance.
He noted Amazon posted $213.4 billion in revenue and $24.98 billion in operating income, slightly above expectations, while capex of $38.47 billion exceeded consensus.
Jones said sentiment weakened after Amazon guided first-quarter operating income of $16.5 billion–$21.5 billion, about 15% below consensus at the midpoint, reflecting roughly $1 billion in higher costs tied to Amazon Leo and international investments.
He added that Amazon’s $200 billion 2026 capex outlook raises the risk of little or negative free cash flow next year, though he still sees upside in AWS and Ads that could help offset heavier investment.
Jones reiterates an Outperform rating and a $320 price forecast, dismissing the recent 11% stock drop as “overdone.”
Price Actions: MSFT stock was up 0.84% at $396.96 at last check on Friday. AMZN was down 7.87%.
Image created using artificial intelligence via Gemini.
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