This article first appeared on GuruFocus.
Evercore ISI analysts have outlined what could be a notable divergence emerging inside the AI infrastructure buildout, with Microsoft (NASDAQ:MSFT) standing out as the only hyperscaler among the Magnificent Seven projected to grow free cash flow in 2026. In a note led by Amit Daryanani, Evercore indicates Microsoft could deliver 5% free cash flow growth that year, even as artificial intelligencerelated capital spending accelerates across the group. By comparison, Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), and Meta Platforms (NASDAQ:META) are each expected to post year-over-year free cash flow declines in 2026, with Oracle (NYSE:ORCL) also projected to see a drop. Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL), however, are estimated to generate double-digit free cash flow growth, suggesting a potentially different cash flow trajectory within the same AI investment cycle.
The broader context is a sharp step-up in spending. Evercore expects hyperscaler capital expenditures to rise 58% in 2026 to more than $700 billion. Over the last three years, aggregate capex for the Magnificent Seven plus Oracle accounted for roughly 40% or less of aggregate cash flow from operations, but that ratio moved to about 50% in CY25 and is projected to exceed 60% in both CY26 and CY27. While AI-driven demand may provide a compelling long-term investment rationale, Evercore cautions that the near-term impact could include weaker free cash flow, constrained capital returns, and increased sensitivity to financing conditions, particularly if debt becomes a more meaningful funding source for infrastructure expansion.
Valuation dispersion is also starting to matter. Evercore notes that Apple trades below 30x CY26 and CY27 free cash flow, while the average Magnificent Seven free cash flow multiple currently stands above 95x. Daryanani raises the question of how long hyperscalers can sustain this scale of investment, especially as free cash flow dips below zero in some cases. If funding dynamics shift and leverage becomes more prominent, investor focus could increasingly tilt toward less capital-intensive assets, with greater emphasis on return on invested capital and disciplined capital allocation.
