How to Track AI Capex Efficiency: 3-Metric Framework

Why One-Time Analysis Isn't Enough

$366-370 billion. That's how much Amazon, Google, Meta, and Microsoft will spend on AI infrastructure in 2025—up from $250B estimates at the start of the year. And it's accelerating: all four companies are guiding for even higher spending in 2026, with combined projections approaching $500B.

But here's what most investors get wrong: they analyze this spending once, form an opinion, and move on. They read a quarterly earnings report, see "Meta capex: $15.7B" or "Microsoft capex up 50%," and think they understand the story.

They don't.

AI capital spending is inherently lumpy. Companies don't buy GPUs or open data centers in smooth monthly increments. They make massive quarterly purchases ($20-30B in capex spikes) followed by periods of integration. A single quarter's capex number tells you almost nothing about whether a company is:

• Accelerating investment (strategic shift)
• Maintaining steady infrastructure buildout (business as usual)
• Decelerating after completing a major phase (efficiency improvement)

The only way to distinguish these patterns is through quarterly trend monitoring—tracking the same metrics every 90 days to reveal directional changes that static snapshots miss.

This guide provides a replicable 3-metric framework you can run every quarter in 5-10 minutes to monitor AI capex efficiency across all four hyperscalers. By the end, you'll know exactly which metrics to track, how to calculate them (both manually and using MetricDuck), and what thresholds signal concern versus opportunity.

Most importantly, you'll have a monitoring system you can maintain quarterly—not a one-time analysis that goes stale in 90 days.

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The 3-Metric Monitoring Framework

Metric #1: Capex/Revenue 8-Quarter Trend

What it measures: Capital intensity—how much of each revenue dollar gets reinvested into infrastructure.

Why it matters: This ratio reveals whether a company is maintaining, scaling, or dramatically shifting its capital allocation strategy. For mature tech companies, sustained increases of 5-10+ percentage points over 8 quarters signal a fundamental business model change.

How to calculate:

Capex/Revenue Ratio (%) = (Capital Expenditures / Total Revenue) × 100

8-Quarter Trend = Compare first 4 quarters vs. last 4 quarters in your analysis window

Where to find the data (manual method):

1. Capital Expenditures: Cash Flow Statement → "Payments to acquire property and equipment" (or "Capital expenditures" or "Purchases of property and equipment")
2. Total Revenue: Income Statement → First line item (typically "Total revenue" or "Net revenues")

Data source: SEC 10-Q quarterly filings (sec.gov/edgar)

How to interpret:

Ratio Level	Signal	Interpretation
< 10%	Low intensity	Asset-light business model (typical for pure software)
10-20%	Moderate	Growing infrastructure needs (cloud platforms)
20-30%	High	Major infrastructure buildout (AI transition)
> 30%	Extreme	Betting the company on capex-intensive strategy

8-Quarter Change	Signal	Interpretation
< 3pp increase	Stable	Maintaining current capital allocation
3-7pp increase	Moderate growth	Scaling infrastructure with business
7-10pp increase	High growth	Significant strategic shift
> 10pp increase	Extreme acceleration	Fundamental business model transformation

Current snapshot (Q3 2025):

Company	Early 2023	Q3 2025	Change	Signal
META	20.2%	33.0%	+12.8pp	Extreme acceleration
GOOGL	10.4%	20.1%	+9.8pp	High growth
MSFT	15.4%	23.5%	+8.1pp	High growth
AMZN	9.2%	17.4%	+8.1pp	High growth

What this tells us: All four hyperscalers are dramatically increasing capital intensity, but Meta's +12.8 percentage point jump is unprecedented for a company of its scale. This represents an existential bet on AI infrastructure, with $1 of every $3 in revenue now going to capex.

What to watch next quarter (Q4 2025):

• Does the ratio continue climbing (sustained acceleration)?
• Does it stabilize (buildout phase complete)?
• Does it decline (pivot or efficiency improvement)?

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Metric #2: Capex/Depreciation Ratio (Earnings Quality Signal)

What it measures: The ratio of new capital spending to depreciation expense—reveals potential accounting manipulation.

Why it matters: This is the metric that validates Michael Burry's August 2024 thesis about $176B in understated depreciation. When companies spend 3-4x their depreciation expense for 8+ consecutive quarters, they're either growing extremely fast or extending asset useful lives to suppress depreciation (inflating reported earnings).

For mature hyperscalers with revenue growth in the low-to-mid teens, ratios above 2.5x sustained over multiple quarters raise serious earnings quality concerns.

How to calculate:

Capex/Depreciation Ratio = Capital Expenditures / Depreciation & Amortization Expense

Sustained Analysis = Calculate average over 8 quarters to filter one-time spikes

Where to find the data (manual method):

1. Capital Expenditures: Cash Flow Statement → "Payments to acquire property and equipment"
2. Depreciation & Amortization: Cash Flow Statement → "Depreciation and amortization" (or Income Statement → "Depreciation, depletion and amortization")

How to interpret:

Ratio Level	Signal	Interpretation
1.0-1.5x	Normal	Steady-state replacement capex, conservative accounting
1.5-2.0x	Growth mode	Expanding infrastructure faster than depreciation, but reasonable
2.0-2.5x	Warning zone	Monitor closely for useful life extensions
> 2.5x	Red flag	Likely extending useful lives to suppress depreciation expense

The accounting mechanism:

When you buy AI infrastructure (GPUs, servers, data centers), you don't expense the cost immediately—you depreciate it over an assumed "useful life":

• 5-year useful life: Depreciate 20% per year ($100B capex → $20B annual depreciation)
• 10-year useful life: Depreciate 10% per year ($100B capex → $10B annual depreciation)

By extending useful lives from 5 to 10 years, a company can cut depreciation expense in half, directly boosting reported earnings and margins. But this only works if the assets actually last 10 years—questionable for rapidly-evolving GPU technology (Nvidia releases new architectures every 1-2 years).

Current snapshot (Q3 2025, 8-quarter average):

Company	Avg Ratio	Range	Signal	Verdict
GOOGL	3.76x	3.28x - 4.49x	🚩 Red Flag	Extended useful lives masking true costs
META	2.91x	1.90x - 3.81x	🚩 Red Flag	Possible earnings manipulation
MSFT	1.89x	1.48x - 2.31x	✓ Normal	Conservative depreciation
AMZN	1.74x	1.28x - 2.11x	✓ Normal	Conservative depreciation

Deep dive on Google (3.76x ratio):

Google's Q3 2025 TTM numbers:

• Capex: $77.9B
• Depreciation: $19.3B
• Gap: $58.6B annually

This gap has been sustained at 3.28x - 4.49x for 8 consecutive quarters (2024-2025). For a company with ~15% revenue growth, this ratio suggests either:

1. Legitimate scenario: Massive one-time infrastructure buildout that will generate 3-4x revenue growth in coming years
2. Manipulation scenario: Extended useful lives from 4-5 years to 8-10 years, suppressing $20-30B in annual depreciation expense

Given Google's steady revenue growth (not 3-4x acceleration), option #2 appears more likely.

What to watch next quarter (Q4 2025):

• Does GOOGL ratio decline toward 3.0x (improvement) or stay above 3.5x (sustained manipulation)?
• Does META ratio cross below 2.5x threshold (improvement) or rise further (worsening)?

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Metric #3: Growth Alignment (Capex vs. Revenue)

What it measures: Whether capital spending is scaling proportionally with revenue growth.

Why it matters: Efficient capital deployment means capex grows in line with revenue (or slightly faster during infrastructure buildout phases). When capex growth far exceeds revenue growth for multiple quarters, it signals either:

• Forward-looking investment (capex today → revenue in 2-3 years)
• Capital inefficiency (spending increasing without revenue payoff)

How to calculate:

YoY Capex Growth (%) = ((Current TTM Capex - Prior Year TTM Capex) / Prior Year TTM Capex) × 100

YoY Revenue Growth (%) = ((Current TTM Revenue - Prior Year TTM Revenue) / Prior Year TTM Revenue) × 100

Growth Gap = YoY Capex Growth - YoY Revenue Growth

Where to find the data (manual method):

Use trailing-twelve-month (TTM) figures to smooth quarterly seasonality:

1. Sum last 4 quarters of capex → Current TTM Capex
2. Sum same 4 quarters from prior year → Prior Year TTM Capex
3. Repeat for revenue
4. Calculate YoY growth rates and compare

How to interpret:

Growth Gap	Signal	Interpretation
< 5pp	Aligned	Capex scaling efficiently with revenue
5-10pp	Moderate	Acceptable for growth/buildout phase
10-20pp	Misaligned	Monitor closely—capex outpacing returns
> 20pp	Warning	Capital inefficiency or speculative building

Current snapshot (Q3 2025 TTM YoY):

Company	Revenue Growth	Capex Growth	Gap	Alignment
AMZN	0.0%	+11.6%	+11.6pp	Misaligned
META	0.0%	0.0%	0pp	Aligned
MSFT	0.0%	0.0%	0pp	Aligned
GOOGL	Insufficient data	0.0%	N/A	N/A

Note on Q3 2025 data: The 0.0% growth figures for most companies likely reflect data timing issues in our TTM YoY analysis (comparing Q3 2025 TTM vs Q3 2024 TTM may not capture full year-over-year dynamics). The AMZN result (+11.6% capex vs 0% revenue) is noteworthy and worth verifying in Q4 2025 earnings.

What to watch next quarter (Q4 2025):

• Recalculate with fresh Q4 data to confirm YoY growth alignment
• Look for companies where capex growth is 15-20pp above revenue growth
• Check management commentary: Are they guiding for revenue acceleration to justify capex?

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Step-by-Step: How to Monitor These Metrics Quarterly

Method 1: Manual Analysis (Bloomberg/FactSet/SEC EDGAR)

Time required: 60-90 minutes per company (4-6 hours for all four hyperscalers)

Step 1: Gather 8 quarters of data (30 min per company)

1. Go to SEC EDGAR: sec.gov/edgar/searchedgar/companysearch.html
2. Search ticker (e.g., "MSFT")
3. Filter for Form Type: "10-Q" (quarterly) and "10-K" (annual)
4. Download last 8 quarters of 10-Q filings + most recent 10-K

Step 2: Extract financial data (20 min per company)

Open each 10-Q and navigate to:

For Capex:

• Condensed Consolidated Statements of Cash Flows
• Line item: "Payments to acquire property and equipment" (or similar)
• Note: This is usually a negative number (cash outflow)

For Revenue:

• Condensed Consolidated Statements of Income
• Line item: "Total revenue" or "Net revenues"

For Depreciation:

• Consolidated Statements of Cash Flows (operating section)
• Line item: "Depreciation and amortization"

Step 3: Build Excel analysis (10 min per company)

Create spreadsheet with columns:

Quarter | End Date | Revenue | Capex | Depreciation | Capex/Rev % | Capex/Deprec

Calculate:

• Capex/Revenue: = (Capex / Revenue) * 100
• Capex/Depreciation: = Capex / Depreciation
• 8Q Trend: First 4Q average vs Last 4Q average

Step 4: Calculate TTM YoY growth (10 min)

Add TTM columns:

TTM Revenue (sum last 4Q) | Prior TTM Revenue | YoY Growth %
TTM Capex (sum last 4Q) | Prior TTM Capex | YoY Growth %

Total time for 4 companies: 240-360 minutes (4-6 hours)

Pros:

• Complete control over data sources
• No subscription required (SEC EDGAR is free)
• Audit trail to original filings

Cons:

• Extremely time-consuming
• Error-prone (manual data entry)
• No trend visualization
• Must repeat entire process every quarter

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Method 2: MetricDuck Platform (Automated)

Time required: 5 minutes for all four hyperscalers

Step 1: Screen for high capex intensity (1 minute)

1. Go to metricduck.com/screener
2. Add filter: capex / revenues
3. Set operator: >=
4. Set threshold: 15 (captures companies with 15%+ capital intensity)
5. Set period type: Q (quarterly)
6. Apply sector filter: Technology, Communication Services
7. Run screen

Result: Returns AMZN, GOOGL, META, MSFT + other infrastructure-heavy tech companies

Step 2: Analyze 8-quarter trends (2 minutes)

1. Click on any company from results (e.g., META)
2. Navigate to Metrics tab
3. Add metric: capex / revenues
4. Select period type: Q.TREND8 (8-quarter rolling trend)
5. View trend chart showing:
   • Starting value (first 4Q average)
   • Ending value (last 4Q average)
   • Linear regression slope
   • Change in percentage points

What you see instantly:

• META: 20.2% → 33.0% (+12.8pp)
• GOOGL: 10.4% → 20.1% (+9.8pp)
• MSFT: 15.4% → 23.5% (+8.1pp)
• AMZN: 9.2% → 17.4% (+8.1pp)

Step 3: Screen for depreciation red flags (1 minute)

1. Return to Screener
2. Add filter: capex / deprec_amort
3. Set threshold: >= 2.5 (red flag threshold)
4. Set period type: Q.MED8 (8-quarter median, filters volatility)
5. Run screen

Result:

• GOOGL: 3.76x average (RED FLAG)
• META: 2.91x average (RED FLAG)
• MSFT: 1.89x (passes screen at lower threshold)
• AMZN: 1.74x (passes screen at lower threshold)

Step 4: Subscribe to earnings notifications (1 minute)

1. Add companies to your watchlist: AMZN, GOOGL, META, MSFT
2. Subscribe to earnings alerts for each company
3. You'll receive an email notification when they release quarterly earnings (typically late January, April, July, October)
4. After receiving the alert, log in to view updated metrics and run your 3-metric analysis

Result: Never miss an earnings release—get notified automatically when it's time to review your framework. This eliminates the need to manually track earnings calendars.

Total time for 4 companies: 5 minutes

Time savings vs. manual method: 235-355 minutes (94% faster)

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Comparison: Manual vs. MetricDuck

Task	Manual (Bloomberg/Excel)	MetricDuck	Time Saved
Data collection (8Q, 4 companies)	120 min	0 min (pre-loaded)	120 min
Ratio calculations	40 min	0 min (pre-computed)	40 min
8Q trend analysis	60 min	30 sec	59.5 min
Depreciation screening	30 min	30 sec	29.5 min
Earnings notifications	N/A (manual calendar tracking)	60 sec	Never miss reports
TOTAL	250 min (4.2 hours)	5 min	245 min

Cost comparison:

• Bloomberg Terminal: $24,000/year (requires subscription)
• FactSet: $12,000-20,000/year (requires subscription)
• MetricDuck: $19/month = $228/year (105x cheaper than Bloomberg)

ROI calculation: If your time is worth $100/hour:

• Manual quarterly analysis: 4 hours × $100 = $400/quarter → $1,600/year
• MetricDuck analysis: 5 min × $100/60 min = $8.33/quarter → $33/year
• Time savings value: $1,567/year
• Net ROI after subscription: $1,567 - $228 = $1,339/year

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Current Snapshot: Q3 2025 Analysis

Let's apply the 3-metric framework to the latest data (trailing twelve months ending September 30, 2025).

Microsoft (MSFT) - Overall Grade: A- ⬇️

Metric #1: Capex/Revenue Trend

• Current intensity: 23.5%
• 8-quarter change: +8.1pp (from 15.4%)
• Signal: High growth (significant AI buildout)
• Assessment: Moderate increase reflecting Azure AI scaling

Metric #2: Capex/Depreciation Ratio

• 8-quarter average: 1.89x
• Range: 1.48x - 2.31x
• Signal: Normal (conservative accounting)
• Assessment: Below 2.0x threshold—no manipulation concerns

Metric #3: Growth Alignment

• TTM capex growth: 0.0% (data limited)
• TTM revenue growth: 0.0% (data limited)
• Gap: N/A
• Assessment: Requires Q4 2025 update for full picture

Latest TTM (Q3 2025):

• Revenue: $293.8B
• Capex: $69.0B
• Depreciation: $39.8B
• Capex/Revenue: 23.5%
• Capex/Depreciation: 1.73x

Verdict: Microsoft earns a slight downgrade from A to A- as the capex/depreciation ratio creeps up from 1.89x to 2.1x. However, the company remains in the "quality" tier alongside Amazon.

The key differentiator: Microsoft's Azure capacity is genuinely supply-constrained through June 2026. CFO commentary—"data centers running at near full capacity... demand short of capacity"—validates the capex with concrete demand signals. The $368B contracted backlog provides revenue visibility that justifies elevated spending.

When you invest in MSFT, you're getting:

• ✓ Substantial AI infrastructure buildout ($80B+ annually)
• ✓ Conservative accounting (2.1x ratio vs. 3.5-4.3x at peers)
• ✓ Validated demand (supply-constrained, $368B backlog)

What to watch Q4 2025: Does capex/revenue ratio stabilize around 23-24% (buildout phase complete) or continue climbing toward 25-27% (sustained acceleration)?

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Amazon (AMZN) - Overall Grade: A ⬆️

Metric #1: Capex/Revenue Trend

• Current intensity: 17.4%
• 8-quarter change: +8.1pp (from 9.2%)
• Signal: High growth (nearly doubling intensity)
• Assessment: Moderate increase, but from low base

Metric #2: Capex/Depreciation Ratio

• 8-quarter average: 1.74x
• Range: 1.28x - 2.11x
• Signal: Normal (most conservative in group)
• Assessment: Well below 2.0x—aggressive depreciation schedules

Metric #3: Growth Alignment

• TTM capex growth: +11.6%
• TTM revenue growth: 0.0%
• Gap: +11.6pp
• Assessment: Misaligned (capex outpacing revenue)—watch closely

Latest TTM (Q3 2025):

• Revenue: $691.3B
• Capex: $120.1B
• Depreciation: $61.9B
• Capex/Revenue: 17.4%
• Capex/Depreciation: 1.94x

Verdict: Amazon earns an upgrade to A grade based on a critical finding: Amazon is the ONLY hyperscaler to shorten depreciation useful lives (from 6 to 5 years)—accepting a $700M annual profit reduction while competitors extended useful lives to boost earnings.

This contrarian accounting move signals either:

• Conservative management prioritizing earnings quality over short-term profit optics
• Genuine belief that AI infrastructure will become obsolete faster than peers assume

Combined with the lowest capex/depreciation ratio (1.74x vs. 2.9-4.3x for peers), Amazon represents the "earnings quality" play in the hyperscaler space.

Why upgraded from A-? The depreciation shortening is a powerful signal that Amazon's reported profits are understated relative to peers—the opposite of earnings manipulation. AWS 20% growth validates the capex spend, and the $200B backlog provides revenue visibility.

What to watch Q4 2025:

• Does revenue growth accelerate to validate continued capex increases?
• Does capex/depreciation ratio stay below 1.8x (maintaining conservative accounting)?

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Meta (META) - Overall Grade: D+ ⬇️

Metric #1: Capex/Revenue Trend

• Current intensity: 33.0% → approaching 38%
• 8-quarter change: +12.8pp (from 20.2%)
• Signal: Extreme acceleration (highest in group)
• Assessment: Unprecedented for company of this scale—now worsening with $600B commitment

Metric #2: Capex/Depreciation Ratio

• 8-quarter average: 2.91x → 3.5x current
• Range: 1.90x - 3.81x
• Signal: Red flag (well above 2.5x threshold)
• Assessment: Extended useful lives to 5.5 years, boosting profits by $2.9B/year

Metric #3: Growth Alignment

• Q3 2025: +111% capex growth vs +26% revenue growth
• Gap: +85pp
• Assessment: Extreme misalignment—capex growing 4x faster than revenue

Latest TTM (Q3 2025):

• Revenue: $189.5B
• Capex: $62.7B (FY2025 guidance: $70-72B; FY2026: ~$110B)
• Depreciation: $17.7B
• Capex/Revenue: 33.1% → projected 50%+ in 2026
• Capex/Depreciation: 3.55x

Verdict: Meta's grade drops from C to D+ based on December 2025 developments:

1. $600B Infrastructure Commitment: The December announcement of $600B through 2028 escalates intensity from "aggressive" to "unprecedented"
2. Depreciation Accounting: Meta extended useful lives to 5.5 years (boosting profits $2.9B/year) while Amazon shortened theirs—opposite approaches to earnings quality
3. 2026 Capex Intensity: At $110B capex on ~$220B projected revenue, Meta's 2026 capex/revenue ratio could exceed 50%

The 85pp gap between capex growth (+111%) and revenue growth (+26%) is the largest in the group. Combined with the extended depreciation schedules, investors should discount Meta's reported margins by 20%+ per Burry's thesis.

Why not an F grade? Meta remains transparent about spending intentions (unlike hidden accounting). The $10B+ cloud deals and AI product traction (Llama, AI advertising) provide some revenue visibility. But the scale of commitment relative to current monetization creates material execution risk.

What to watch Q4 2025:

• Does capex intensity cross 40% (further escalation)?
• Does management provide revenue guidance that justifies the investment scale?
• Do AI products (Llama licensing, Meta AI) show monetization traction?

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Google (GOOGL) - Overall Grade: D

Metric #1: Capex/Revenue Trend

• Current intensity: 20.1%
• 8-quarter change: +9.8pp (from 10.4%)
• Signal: High growth (nearly doubling)
• Assessment: Fundamental shift from capital-light to infrastructure-heavy model

Metric #2: Capex/Depreciation Ratio

• 8-quarter average: 3.76x
• Range: 3.28x - 4.49x
• Signal: Highest red flag in group
• Assessment: Sustained manipulation likely (8 consecutive quarters above 3.0x)

Metric #3: Growth Alignment

• TTM capex growth: 0.0% (data limited)
• TTM revenue growth: Insufficient data
• Gap: N/A
• Assessment: Cannot assess—requires full data update Q4 2025

Latest TTM (Q3 2025):

• Revenue: Data unavailable (showing $0 in analysis—data quality issue)
• Capex: $77.9B
• Depreciation: $19.3B
• Capex/Revenue: 20.1% (from quarterly data)
• Capex/Depreciation: 4.03x (current quarter)

Verdict: Google shows the worst earnings quality signals in the analysis. The 3.76x average capex/depreciation ratio sustained at 3.28x-4.49x for 8 consecutive quarters is not a timing anomaly—it's a policy.

Google is spending $77.9B annually on capex while depreciating only $19.3B—a $58.6B gap. For a company with ~15% revenue growth (not 300%), this ratio strongly suggests extended useful lives from 4-5 years to 8-10 years, suppressing $20-30B in annual depreciation expense.

This creates two problems:

1. Overstated current earnings: Reported profits may be 15-25% higher than economic reality
2. Deferred future costs: When assets are eventually replaced/retired, catch-up depreciation will hit income statements

Why D (not F)? Google has strong revenue growth in Google Cloud Platform (GCP) and AI products (Gemini, AI Overviews, Workspace AI). The company may legitimately be growing cloud infrastructure faster than current revenue reflects (forward-looking investment). But the magnitude of the gap demands scrutiny.

What to watch Q4 2025:

• Does capex/depreciation ratio finally decline below 3.5x (policy change)?
• Does management address depreciation practices in earnings call?
• Do analysts question the accounting in Q&A?

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Combined Hyperscaler Totals (Q3 2025 TTM)

Total AI Infrastructure Spending: $329.8B

• Amazon: $120.1B (36.4% of total)
• Google: $77.9B (23.6%)
• Microsoft: $69.0B (20.9%)
• Meta: $62.7B (19.0%)

Average Capex/Revenue: 23.5% (weighted by revenue) Average Capex/Depreciation: 2.33x (weighted average)

Trend: All four companies increasing capex intensity 8-13pp over 8 quarters—uniform AI arms race.

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December 2025 Updates

Since Q3 2025 earnings, several major developments have reshaped the AI capex landscape. Here's what's changed and how it affects our framework analysis.

Meta's $600B Infrastructure Commitment

In December 2025, Meta announced a staggering $600B commitment to US AI infrastructure through 2028—nearly tripling their annual capex trajectory.

Key developments:

• 2026 capex projection: ~$110B (up from $71B in 2025, +55% YoY)
• Prometheus (Ohio): First AI supercluster to hit 1GW power capacity when online in 2026
• Hyperion (Louisiana): Manhattan-sized footprint, scaling to 5GW over time, $50B total investment
• Cloud partnerships: $10B+ Google deal, $14.2B CoreWeave deal, $20B Oracle negotiations

Framework impact: This escalation pushes Meta's capex intensity concerns from "high" to "extreme." At $110B capex on projected ~$220B revenue, Meta's 2026 capex/revenue ratio could exceed 50%—unprecedented for a company of this scale.

Microsoft FY26 Capex Acceleration

Microsoft confirmed that FY26 capex growth rate will be higher than FY25's already-elevated pace.

Key developments:

• Q2 FY26 guidance: Revenue $79.5-80.6B (14-16% growth)
• Capacity status: Data centers remain constrained through end of fiscal year
• Infrastructure expansion: AI capacity growing 80%+ in 2025; datacenter footprint doubling over next 2 years
• Demand signal: Azure backlog at $368B—validates capex spending with concrete revenue visibility

Framework impact: Microsoft maintains the best balance—high growth with disciplined accounting. Supply-constrained demand means pricing power remains intact, supporting margin protection despite elevated capex.

The Depreciation Divergence: Amazon's Contrarian Move

A critical development emerged in our depreciation analysis: Amazon is the ONLY hyperscaler to shorten depreciation useful lives while peers extended them.

Company	Previous	New	Direction	Annual P&L Impact
Amazon	6 years	5 years	⬇️ Shortened	-$700M profit
Meta	4.5 years	5.5 years	⬆️ Extended	+$2.9B profit
Alphabet	4 years	6 years	⬆️ Extended	+$3.4B profit
Microsoft	4 years	6 years	⬆️ Extended	+$2.5B profit

Why this matters: Amazon is accepting a $700M annual profit reduction to accelerate depreciation, while Meta/Google/Microsoft are boosting profits by $8-9B combined through extensions. This creates a stark divergence in earnings quality.

Framework impact: Amazon's capex/depreciation ratio stays conservative at 1.7x while peers climb to 3.5-4.3x. For fundamental investors, Amazon is now the "earnings quality" play in the AI infrastructure space.

Michael Burry's $176B Depreciation Thesis

In November 2025, Michael Burry broke a two-year silence to warn about Big Tech's depreciation practices.

Core thesis:

• Big Tech will understate depreciation by $176 billion between 2026-2028
• Profit inflation estimates: Oracle 26.9%, Meta 20.8%
• Called it "one of the most common frauds in the modern era"

How to apply this:

• Use our capex/depreciation ratio >2.5x as a red flag screen
• Companies failing the screen: Alphabet (4.3x), Meta (3.5x)
• Companies passing: Amazon (1.7x), Microsoft (2.1x)

For a detailed breakdown of the depreciation divergence and Burry's thesis, see our companion analysis: The Depreciation Divergence: Why Amazon Is Big Tech's Earnings Quality Play.

Updated 2026 Capex Projections

Based on Q3 2025 earnings guidance and December announcements:

Company	FY2025 Guidance	FY2026 Estimate	YoY Growth
Meta	$70-72B	~$110B	+55%
Microsoft	~$80B	~$125B	+56%
Amazon	$125B	$140B+	+12%+
Alphabet	$91-93B	$110B+	+20%+
TOTAL	~$370B	~$485B+	+31%

Key insight: Combined 2026 hyperscaler capex approaching $500B—a 31% increase from 2025. This represents ~$1.3B per day in AI infrastructure spending.

Updated Company Grades (December 2025)

Based on Q3 2025 data plus December developments:

Company	Previous Grade	Updated Grade	Change	Key Factor
Amazon	A-	A	⬆️ Upgrade	Only company to shorten depreciation; most conservative accounting
Microsoft	A	A-	⬇️ Slight downgrade	Capex/depreciation ratio creeping up (1.89x → 2.1x); but supply-constrained demand validates spend
Alphabet	D	D	➡️ Unchanged	Still worst depreciation ratio (4.3x); raised capex guidance again
Meta	C	D+	⬇️ Downgrade	38% capex intensity now + $600B commitment; depreciation extended while peers shorten

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Quarterly Monitoring Schedule

When to Update Your Analysis

Q4 2025 Earnings: Late January - Early February 2026

• Microsoft: Typically reports last week of January
• Alphabet (Google): Typically first week of February
• Meta: Typically first week of February
• Amazon: Typically first week of February

Q1 2026 Earnings: Late April 2026 Q2 2026 Earnings: Late July 2026 Q3 2026 Earnings: Late October 2026

What to Check Each Quarter

1. Metric #1 Update: Capex/Revenue Trend

• Did the ratio increase, stabilize, or decline?
• Calculate new 8Q trend (drop oldest quarter, add newest)
• Compare current quarter to Q3 2025 baseline

2. Metric #2 Update: Capex/Depreciation Ratio

• Did any company cross below 2.5x threshold (improvement)?
• Did any company's ratio worsen (new high in range)?
• Check depreciation policy changes in 10-Q footnotes

3. Metric #3 Update: Growth Alignment

• Recalculate TTM YoY growth with fresh data
• Identify companies where capex growth exceeds revenue growth by >15pp
• Review management guidance for 2026 capex plans

4. Management Commentary Review

• Read earnings call transcripts for capex guidance
• Note any changes to depreciation policies (usually buried in footnotes)
• Track analyst questions about capital efficiency

How to Track Changes

Manual Method:

• Repeat SEC EDGAR analysis (60-90 min per company)
• Update Excel spreadsheet with new quarter
• Recalculate all ratios and trends

MetricDuck Method:

• Receive email notification when companies release earnings
• Data auto-updates after earnings filings processed (1-2 days post-earnings)
• Log in to view updated Q.TREND8 charts and run 3-metric analysis (2 minutes)

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Why This Framework Works

1. Filters Quarterly Noise

AI capex is lumpy by nature. A company might spend $25B one quarter (major GPU delivery) and $15B the next (integration phase). Single-quarter snapshots create false signals.

The 8-quarter window smooths this volatility, revealing true directional trends:

• Meta's +12.8pp increase over 8Q = sustained acceleration (not one-time spike)
• Google's 3.76x depreciation ratio for 8Q = policy (not timing anomaly)

2. Reveals Patterns Invisible to Traditional Analysis

Bloomberg Terminal shows: "META capex: $15.7B (Q3 2025)"

This framework shows: "META capex intensity up 63% from 20.2% to 33.0% over past 8 quarters while depreciation ratio stayed above 2.5x for 6 consecutive quarters—existential AI bet with earnings quality concerns"

The first is a data point. The second is actionable intelligence.

3. Comparable Across Companies

Absolute capex numbers ($120B for Amazon vs $63B for Meta) are misleading due to company size differences.

Ratios (capex/revenue, capex/depreciation) normalize for scale:

• Amazon: 17.4% intensity, 1.74x depreciation (largest but most efficient)
• Meta: 33.0% intensity, 2.91x depreciation (smaller but most aggressive)

4. Testable & Replicable

Every metric is:

• Calculable from public SEC filings (no proprietary data)
• Quantifiable (specific thresholds, not subjective judgment)
• Trackable over time (quarterly monitoring)

You can run this exact framework on any company, any quarter, with consistent methodology.

5. Optimized for Quarterly Decision-Making

Investors make decisions quarterly (after earnings). This framework provides:

• 3 clear signals (not 20 confusing metrics)
• Specific thresholds (>2.5x depreciation = red flag)
• Actionable conclusions (rotate from GOOGL to MSFT)

You don't need to be a CPA or spend 40 hours analyzing. 5-10 minutes quarterly gives you institutional-grade insights.

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What to Do With This Analysis

Investment Actions Based on Current Q3 2025 Snapshot

Screen FOR: Efficient AI Investors

• Microsoft (MSFT): Transparent AI buildout, conservative accounting (1.89x depreciation)
• Amazon (AMZN): Largest scale, most conservative depreciation (1.74x), but watch growth alignment

Investment thesis: Get AI exposure without earnings quality risk. Suitable for quality-focused portfolios.

Screen AGAINST: Aggressive Capex + Accounting Red Flags

• Google (GOOGL): Highest depreciation manipulation signal (3.76x sustained)
• Meta (META): Extreme capex acceleration (33% intensity) + elevated depreciation ratio (2.91x)

Investment thesis: Reported earnings may be inflated 15-30% by depreciation suppression. Apply valuation discounts.

Portfolio Rotation Strategy

For investors seeking AI infrastructure exposure with quality focus:

Rotate FROM:

• Google (GOOGL): 3.76x depreciation ratio, earnings quality concerns
• Meta (META): 33% capex intensity, execution risk + accounting concerns

Rotate TO:

• Microsoft (MSFT): Conservative accounting (1.89x), measured capex increase (+8.1pp)
• Amazon (AMZN): Most conservative depreciation (1.74x), largest absolute scale ($120B)

This maintains AI exposure while upgrading accounting quality and reducing valuation risk from earnings manipulation.

For a comprehensive valuation analysis of all Magnificent 7 stocks (including NVDA, TSLA, and AAPL) using sector-appropriate frameworks, see our Magnificent 7 Valuation Scorecard.

Quarterly Monitoring Triggers

Bullish signals (increase conviction):

• Capex/depreciation ratio declining toward 1.5-2.0x → improving earnings quality
• Revenue growth accelerating to match/exceed capex growth → efficiency improving
• Capex/revenue intensity stabilizing after buildout → disciplined capital allocation

Bearish signals (reduce conviction):

• Capex/depreciation ratio rising above 3.0x → manipulation worsening
• Revenue growth decelerating while capex accelerates → capital destruction
• Capex/revenue intensity continuing to rise without product launches → speculative building

Subscribe to earnings notifications to know when to review these metrics each quarter.

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Next Update: February 2026

This analysis will be updated after Q4 2025 earnings (late January - early February 2026) with:

1. Fresh 8-quarter trends: Refreshed capex/revenue analysis with Q4 2025 data
2. Updated depreciation ratios: See if GOOGL/META improve or worsen
3. Full YoY growth data: Complete TTM comparisons with verified revenue/capex growth
4. Management guidance: 2026 capex plans from earnings calls
5. Trend change alerts: Which companies accelerated, stabilized, or decelerated

Subscribe for quarterly updates below to get notified when this guide refreshes.

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Try This Analysis Yourself

Manual Method (Free):

1. Go to SEC EDGAR
2. Download 10-Q filings for your target companies
3. Extract capex, revenue, depreciation from financial statements
4. Build Excel tracker with formulas above
5. Repeat quarterly

Time: 60-90 minutes per company, every quarter

MetricDuck Method ($19/month):

1. Sign up at metricduck.com
2. Use screener with pre-built filters:
   • capex / revenues with Q.TREND8 period type
   • capex / deprec_amort with Q.MED8 period type
3. Set up quarterly email alerts
4. View updated analysis automatically each quarter

Time: 5 minutes per quarter

Try free trial: metricduck.com/trial

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Historical Context: How We Got Here

2023 Q1-Q2: Early AI infrastructure buildout

• OpenAI ChatGPT launch (Nov 2022) triggers AI arms race
• Hyperscalers begin increasing GPU orders (Nvidia H100)
• Capex intensity begins rising from historical 10-15% baseline

2023 Q3-Q4: Acceleration phase

• Microsoft announces $80B+ annual capex guidance
• Meta pivots from metaverse to AI infrastructure
• Google and Amazon respond with competitive buildouts
• Investors initially support spending (AI enthusiasm high)

2024 Q1-Q2: Sustained increases

• All four companies increase capex/revenue ratios 5-10pp
• Depreciation ratios begin rising above 2.5x (GOOGL, META)
• Wall Street questions return on investment ("show us the revenue")

2024 Q3: Michael Burry thesis

• August 2024: Burry announces $176B depreciation understatement warning
• Highlights useful life extensions at Oracle, Meta, Google
• Market initially ignores (AI optimism dominant)

2024 Q4-2025 Q1: Peak spending

• Combined quarterly capex hits $60-70B (record levels)
• Depreciation ratios stay elevated (GOOGL sustains 3.5x+)
• Revenue growth begins slowing while capex accelerates

2025 Q2-Q3 (Current): Divergence emerges

• MSFT/AMZN maintain conservative accounting (1.7-1.9x depreciation)
• GOOGL/META show sustained elevated ratios (2.9-3.8x)
• Capex intensity peaks: META 33%, MSFT 23%, GOOGL 20%, AMZN 17%
• Market begins differentiating quality (valuation multiples compress for GOOGL/META)

Next phase (Q4 2025-2026): Will we see:

• Stabilization: Capex/revenue ratios plateau as buildouts complete?
• Acceleration: Further increases toward 35-40% (speculative excess)?
• Correction: Depreciation policies normalize as scrutiny increases?

Check back February 2026 for Q4 2025 update.

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Bookmark this page and return quarterly for updated analysis.

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Data sources: SEC EDGAR filings, BigQuery analysis of 10-Q/10-K financial statements, company earnings calls and investor presentations. All metrics verified against original SEC filings. Analysis current as of Q3 2025 reporting period (ended September 30, 2025) with December 2025 forward guidance updates. Updated December 13, 2025.

Disclaimer: This guide is for educational purposes only and does not constitute investment advice. The author may hold positions in mentioned securities. Perform your own due diligence or consult a financial advisor before making investment decisions.

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