BofA Raising Internet capex ests A look into Internet capex, capacity and monetization

Internet/e-Commerce Raising Internet capex ests: A look into Internet capex, capacity and monetization Industry Overview

AI capex returns remain the top hyperscaler debate 07 July 2026

The biggest debate for the Internet hyperscaler stocks remains the return profile on AI Equity capex spend, while biggest concern in 2Q results is that higher capex (and lower FCF United States ests.) will overshadow strong revs. In our view, this concern has outweighed recent Justin Post positive cloud pricing (Amazon) and capacity monetization data points. In this report, we Research Analyst BofAS raise our capex estimates, translate capex into estimated data center GW capacity, and review monetization estimates on that capacity. We also conduct an internet hyperscaler valuation analysis & list potential catalysts that could improve hyperscaler sentiment. Nitin Bansal, CFA Research Analyst Raising capex estimates as hyperscalers prioritize capacity BofAS Given the recent capital raise by Alphabet, reported server order increases by Amazon, LLM capacity use comments from Meta, and higher memory costs, we are raising our sector capex estimates. For Alphabet, we now expect Capex of $195bn in 2026 (vs $187bn previously), $290bn in 2027 (vs $257bn). For Meta, we expect Capex of $145bn in 2026 (vs $130bn previously) and $185bn in 2027 (vs $157bn). For Amazon AWS (excludes retail), we expect Capex of $159bn in 2026 (unchanged), $230bn in 2027 (vs $196bn). (We will adjust our ests for related revenues & depreciation as additional June AI: Artificial Intelligence advertising and Cloud data points come in.) FCF: Free Cash Flow

Sizing hyperscaler data center GW capacity through 2030 GW: Gigawatt API: Application Programming Interface We est. capacity by triangulating capex results and outlooks, Amazon’s GW disclosures, MTIA: Meta Training and Inference Accelerator and industry estimates on costs to build data center capacity. We estimate the Big-3 TAM: Total Addressable Market Internet mega caps had ~27GW capacity exiting 2025, which will grow to 39GW in 2026 LLM: Large Language Model and 57GW in 2027. We estimate Amazon will add the most capacity in 2026-2027 at 15GW, followed by Google at 9GW and Meta at ~6GW, with Amazon’s capacity additions at a lower cost than peers (at around $24bn in AWS capex per GW per 2025 disclosures). Recent capacity deals suggest growing capacity value Assuming 70% of Amazon’s AWS capacity is used for Cloud (vs 30% for core), we estimate AWS revenue per GW of capacity at $10.6bn in 2026, with Google Cloud at $15.7bn. These revenues/GW are well below recent capacity deals by Anthropic and Google with SpaceX at up to $50bn per GW (for specialized AI capacity), which give us optimism on future capacity related revenue upside. For Meta, we estimate the company could have up to ~23GW of capacity by 2030, and if 40% is available for AI enterprise sales, we estimate a $110bn potential enterprise opportunity (assuming $12bn/GW). Internet hyperscaler valuation analysis For our valuation analysis, we back out est. valuations for core advertising and retail revenues (at 12-15x implied P/Es) and look at valuations imbedded in hyperscaler stocks per unit of GW capacity. While our analysis is subject to numerous assumptions & excludes the impact of projects like Leo and Reality Labs., we think our analysis identifies the limited implied value the Street is giving to Meta’s capacity build. Our analysis suggests an implied value for Google at $110bn per 2028 Cloud GW (assuming 70% of capacity for Cloud), Amazon at $59bn per AWS GW, and Meta at $4bn per AI GW. We note that Meta is the major beneficiary with proof points on capacity revenue levers. See our other conclusions on the next page.

BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 15 to 19. Analyst Certification on page 14. Price Objective Basis/Risk on page 13.

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