The Bill for Not Falling Behind: The Capital Half-Life of AI Hardware
Prefer reading in Arabic? Read the Arabic version on Substack Every quarter, the big technology companies tell us how much they spent. They don't tell us how much of that money bought back capacity they already had. The filings we reviewed don't separate the two. In 2025, Amazon changed its mind about how long some of its servers would last. It had raised the estimated useful life from five years…
In 2025, Amazon announced a change in its estimates for the useful life of its servers, increasing it from five to six years. Shortly after, the company recorded a $920 million accelerated depreciation and charges expenses due to retiring equipment early. While this decision was not related to losing customers, it resulted in a negative trailing-twelve-month free cash flow of $7.6 billion for Amazon.
The expansion of AI infrastructure resulted in a $66.1 billion increase in property and equipment purchases, which reflected investments in artificial intelligence. This led to questions about the allocation of capital between creating new computing capacity and retaining existing assets.
Other tech giants such as Microsoft, Alphabet, and Meta also extended the estimated useful lives of their servers and equipment, resulting in increased operating income. However, these extensions are estimates made by management, and the actual impact on profits depends on how accurately the estimates were made.
The rapid pace of technological change has now become a factor in corporate financial statements. In fiscal 2026, Microsoft increased its capital expenditure to $115.9 billion compared to $23.9 billion in the previous year, with $91.1 billion of it allocated to short-lived assets. Roughly 63% of Microsoft's capital expenditure went into equipment that has a shorter lifespan.
The question remains: how much of the billions spent is used to expand the fleet and how much is used to replace existing assets? This missing number is crucial in understanding the true impact of the spending on the companies' balance sheets.
Written by urgent.news from Dev.to's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
