Amazon, Meta, and Alphabet report plunging tax bills thanks to AI investment and new rules in Washington

The build-out of artificial intelligence data centers along with business-friendly provisions in President Trump’s “One Big Beautiful Bill” are combining to make 2025 a banner tax year for Big Tech.

Tax bills have dropped for three companies at the center of the ongoing AI build-out, thanks to new business world deductions enacted last year by Republicans for things like depreciation and research and development costs.

Some of the new provisions offer deferrals, meaning tax bills may be higher down the road, but the changes are set to add billions to these companies’ bottom lines for now.

So far this year, Amazon (AMZN), Meta Platforms (META), and Alphabet (GOOG) have filed annual reports to the government — and all reported significant drops in what they expect to pay in US federal income taxes.

Amazon’s tax bill dropped from about $9 billion in 2024 to $1.2 billion in 2025. Likewise, Meta reported a year-over-year drop from about $9.6 billion in 2024 to $2.8 billion in 2025.

The annual report from Alphabet, meanwhile, reported a tally that combined US federal and state tax totals and showed a drop from about $21.1 billion in 2024 to $13.8 billion in 2025.

These dropping tax bills for 2025 also came as all three companies report profits are on the rise.

Amazon’s domestic profits jumped to nearly $90 billion in 2025 — an over 40% increase from 2024. Alphabet’s domestic profits jumped over 32% to $143.6 billion, while Meta came in at $79.6 billion, a 20% jump.

Some appear to be preparing for criticism — dropping tax bills is an issue that has long inflamed anti-tech sentiments.

Amazon got unwelcome notice in 2018 when it paid $0 in federal taxes. This time, it has offered a lengthy statement to explain that it is simply playing by the new rules.

“Last year Congress made changes to the tax code to encourage greater investment in the American economy, its innovation, and its workers … our tax bill this year reflects those changes,” said the company.

The company said its varied 2025 investments included “Artificial Intelligence (AI) innovation” and totaled more than $340 billion in the US last year. It was also quick to note that many taxes deferred this year will eventually be paid, and reiterated that “this policy ultimately doesn’t change the amount of tax we pay.”

Meta CFO Susan Li added in her company’s recent earnings call that Meta is seeing “substantial cash tax savings from the new US tax laws, given the significant investments that we’re making in infrastructure and R&D.”

A key reason for the windfalls: a series of tax deductions enacted last year and signed into law by Trump that offered credits for corporations around things like property depreciation, capital investments, new factory construction, interest expenses, and research and development costs.

A key last-minute wrinkle was allowing a 100% expensing deduction for new factories and updates to existing factories. This provision came late in the process, in part after a White House push led by Treasury Secretary Scott Bessent.

The changes will have a notable impact on company bottom lines this year but could lead to significant tax bills down the road.

All three companies also have recently reported billions in deferred taxes for 2025. Amazon reported over $11 billion and Meta’s deferred taxes topped $18 billion. The deferred federal and state taxes for 2025 reported by Alphabet were about $8 billion.

And the actual amounts these companies are set to pay this year will be a bit higher than the 2025 bill alone because of deferrals from previous years. Amazon’s total payments this year, for example, total $2.75 billion.

Yet these results have already drawn criticism.

The Institute on Taxation and Economic Policy, a left-leaning think tank, charges that those three companies “avoided” almost $50 billion in taxes when comparing what they paid against the statutory rate of 21%.

The group looked at four companies and included Tesla (TSLA) — which managed to avoid federal taxes completely for 2025. They note that the CEOs of all four companies prominently attended Trump’s inauguration last year.

“Tax cuts pushed through by the Trump administration last year and in 2017 have made it possible for the fastest-growing companies in the world to pay record-low federal income tax rates on their income,” the group wrote. “This is likely just the tip of the iceberg with the vast majority of the nation’s largest corporations yet to disclose their 2025 tax payments.”

Ben Werschkul is a Washington correspondent for Yahoo Finance.

Click here for political news related to business and money policies that will shape tomorrow’s stock prices

Read the latest financial and business news from Yahoo Finance