In today’s tech landscape, we’re witnessing a bizarre, almost ludicrous race among the largest players in the space. Meta, Google, and Amazon seem to be locked in a competition to outspend each other in an attempt to capture the future of the digital economy.
At first glance, it feels like a never-ending game of who can burn through the most cash, with no real question of whether the math behind these moves adds up.
To give you a sense of the scale, consider this:
In 2026, Meta’s projected CapEx is expected to surge between $115 billion and $135 billion, easily surpassing initial estimates.
Google, not to be outdone, followed with an aggressive $175 billion to $185 billion, leaving estimates in the dust.
And now Amazon, aiming for a $200 billion spend, is preparing to outpace even the most bullish predictions ($146 billion).
To put it in perspective, we’re talking about numbers so large that they rival the entire GDP of many sizeable countries.
For comparison, Germany’s entire stimulus plan over the next 12 years is €500 billion, which averages to about €40 billion annually. Yet, here we have Google alone, set to spend more than the entire global mining sector (roughly $100 billion annually) – one of the most capital-intensive industries on Earth – in just one year.
“According to McKinsey analysis, growth capital expenditures for new supplies of metals and minerals, driven by traditional demand and powered by the energy transition, could require $1 trillion over the next ten years.” - McKinsey
In fact, Google’s $180 billion spend in 2026 is roughly equivalent to the combined capital expenditures of all Western oil and gas companies in recent years, as shown in the attached chart.
This kind of massive spending is almost unprecedented in the corporate world.
You don’t have to take my word for it – just look at the numbers from Morgan Stanley Research in the chart below. The capital expenditures of major tech firms like Amazon, Google, Meta, and Microsoft are climbing at a pace that would seem unsustainable under normal circumstances. And there are no signs of slowing down.
But here’s the kicker – while these numbers are wild, there is growth behind them. Google’s cloud division is growing at an incredible 48%, Meta has just seen a reacceleration in its revenue, and Amazon’s business is humming along at full steam – according to math by Wolf of Harcourt Street AWS’s revenue growth accelerated to 24%.
The question this post will attempt to answer is:
What kind of incremental profit growth do these companies need to achieve in order for this massive spend to make sense?
Unpacking the Numbers: How Much Does It Take to Achieve Meaningful ROIIC?
The figures we’re working with – $5.39 trillion in combined CapEx and R&D investments over the next five years – require more than just a cursory glance. To get to the heart of whether this massive spend will generate meaningful returns, we must dig deep into the components that make up this staggering number and understand the assumptions baked into it.
At the foundation of these numbers are two main drivers: Capital Expenditures (CapEx) and Research and Development (R&D) expenses. Together, they constitute the bulk of the planned investment over the coming years, and both categories are pivotal in shaping how these tech giants will position themselves for future growth.
First, let’s break down CapEx. For 2025–2029, the projected CapEx figures are eye-popping:
2025: $437 billion
2026: $716 billion
2027: $885 billion
For 2028–2029, I simply assumed CapEx to hit $1 trillion each year (this is assuming a significant slowdown in CapEx growth; consider that CapEx almost doubles between 2025 (actual) and 2027 estimates)
The goal here is not precision. It’s just to use common sense and some basic assumptions to get a feel for the outcome required for this massive CapEx cycle to make sense.
Tiho Brkan shared this anecdote with me this morning, which may help to illustrate where we are trying to go with this post:
“This is how I would do valuation. Simple, common sense. At one point in 1999, Coke’s valuation reached levels which required every adult in the world to drink a bathtub of Coke per day. And somehow, Munger convinced Buffett not to sell. It just not possible! Buffett later expressed deep regret of not selling“
Back to our CapEx figures: These numbers represent not just a hefty spending spree but also a clear growth strategy. In particular, Google, Meta, and Amazon’s investments are tied to expanding cloud infrastructure, AI advancements, and the pursuit of future-forward technologies like Augmented Reality (AR) in the case of Meta.
It’s important to note that 100% of this CapEx is assumed to be growth-related. Again, I’m highly simplifying things here as it makes my math more straightforward. This assumption is crucial because it emphasizes the strategic intent behind this spend: these companies are pouring money into infrastructure and services that will ideally drive future cash flows. If you believe a good portion of this spend is in fact maintenance spend, you also must assume that these businesses are becoming structurally less profitable.
That said, these expenditures come with inherent risks. CapEx is a long-term investment, and it could take years to see returns. The pressure on these companies to deliver profitable growth from their investment is monumental.
If we combine all the CapEx numbers for 2025 through 2029, we arrive at a cumulative total of $4.038 trillion. That’s no small amount. Not at all!
But to understand the scope, it’s essential to compare it to other global benchmarks. As mentioned earlier, Google’s planned $180 billion CapEx for 2026 would exceed the combined capital expenditures of all Western oil & gas companies. Google’s one-year spend could match or surpass the entire global mining sector’s annual CapEx.
Now, in today’s day and age, a significant portion of growth investments appears on the income statement. Investment into intangible investments. So I figured, I’d be wise to add R&D investments to the mix, which add another layer of complexity and uncertainty to these figures. Over the next five years, we see major companies like Meta, Microsoft, Amazon, Google, and Oracle together investing heavily in R&D.
The trailing R&D figures for each company are as follows:
Meta: $57 billion
Microsoft: $33 billion
Amazon: $108 billion
Google: $61 billion
Oracle: $10.7 billion
Coreweave: $264 million
Summing these up, we get a total R&D expenditure of $269 billion in the most recent trailing year. When we multiply this by 5 – again, I’d expect this figure to grow exponentially over the five years, but I want to keep it simple stupid here, and also add a layer of conservatism –, considering the five-year horizon, we end up with an estimated $1.35 trillion spent on research and development over the next five years.
Adding this to the earlier CapEx figure, we now have a total combined growth investment of $5.39 trillion (CapEx: $4.038 trillion + R&D: $1.35 trillion).
Understanding the ROIIC Targets: What’s Required for Profitability?
The rest of this post is FREE to read. I only ask that you subscribe, which costs nothing and can be undone with a single click whenever you like.
The wall also helps keep my writing from being freely scraped by AI crawlers, so I hope you understand the small extra step.
In return, you get every deep dive, earnings review, and process piece I publish, straight to your inbox.