The biggest US technology companies generated record amounts of cash in the first nine months of 2026, yet returned the smallest share of it to shareholders in at least 15 years as surging artificial intelligence spending squeezed share buybacks. The retreat threatens a long-standing source of support for technology share prices.
With companies buying back fewer shares, investors are increasingly dependent on heavy AI investments delivering enough profit growth to justify their valuations. Microsoft, Alphabet, Amazon, Meta Platforms and Oracle returned 9.3 per cent of the cash their businesses generated as dividends and buybacks in the first three quarters of the year, down from 27.4 per cent a year earlier.
Operating cash flow actually rose 29 per cent from a year earlier to a record $542.9 billion. But capital spending, driven by the AI boom, doubled to $556.9 billion, exceeding the cash the five firms generated for the first time in data going back to 2011.
That left them with a combined free cash flow deficit of $14 billion, against a surplus of $143.5 billion a year earlier. The squeeze has hit buybacks hardest.
The five companies cut repurchases 83 per cent to $13.6 billion, from $81.8 billion a year earlier. Dividends, which investors treat as a commitment, rose to $37 billion in the first nine months of 2026 from $33.9 billion a year earlier.
Buybacks almost disappeared. Alphabet and Meta Platforms have not repurchased a share in 2026, after buying back $66.5 billion in the first nine months of last year.
Amazon pays no dividend and has not bought back shares since 2022. Microsoft accounted for nearly all the five companies' remaining repurchases, and cut its buybacks to $4.4 billion in the September quarter from $5.7 billion a year earlier.
Some companies are no longer covering their payouts from what their businesses earn after capital spending. With combined free cash flow negative, the five companies' $50.6 billion in payouts was effectively funded from cash reserves, borrowing or share sales.
Amazon's capital spending of $75.9 billion in the third quarter was almost 80% more than the $42.4 billion its operations generated, and it raised $48.1 billion of long-term debt in the quarter. Alphabet's free cash flow was also negative, and it raised about $12.4 billion from share sales and $29 billion from debt.
The loss of buybacks matters more than the dollar figures suggest, because buybacks have flattered per-share earnings for years. When companies buy back and retire their own shares, profits are spread across fewer shares, lifting earnings per share even when total profits do not grow.
Alphabet reduced its share count by 9.5 per cent between the end of 2020 and 2025 through buybacks, ING said. That alone provided a boost of roughly 2.0 per cent a year to earnings per share (EPS), even without any increase in profits.
Without that boost, per-share earnings must come from actual profit growth. That is a harder test, and it arrives just as depreciation charges on new data centres start to rise.
It also lands where investors are most sensitive. Investors care "so much more about EPS than FCF," Mark Schilsky, a technology sector specialist at JPMorgan, said in a client note last week.
Technology and communication services stocks, which account for about 43.5 per cent of US market value, delivered a shareholder yield of just 0.28 per cent in July, against 1.99 per cent previously.