Chicago, IL – December 30, 2025 – Today, Zacks Investment Ideas feature highlights Amazon (AMZN – Free Report) , Alphabet (GOOGL – Free Report) , Meta Platforms (META – Free Report) and Microsoft (MSFT – Free Report) .

Buy the “Mag 7” Hyperscalers Or Are They Spending Too Much?

Although they are among the world’s most profitable companies and have strong balance sheets, the immense spending on various AI investments from the hyperscalers in the Mag 7 has been scrutinized.

This includes Amazon, Alphabet, Meta Platforms and Microsoft, which are building and operating massive global-scale cloud infrastructures that are needed to run AI models and huge data workloads.

There is no doubt that “hyperscaling” is the only way to run AI, cloud, and data-intensive services at the ultimate speed and accuracy that is now expected, but investors have started to ponder whether these companies are overspending on questionable and value-destroying projects.

Outside of valuation, this has brought about the need to analyze the capital efficiency of the Mag 7 hyperscalers, particularly return on invested capital (ROIC). To that point, ROIC illustrates the ability to return invested capital into profits and is one of the clearest indicators of long-term shareholder value.

Microsoft Headlines CapEx Concerns

Notably, the Mag 7 hyperscalers are all expected to exceed $100 billion in annual capital expenditures for AI-related infrastructure by 2026.

At the moment, the highest single-year CapEx figure currently goes to Microsoft. The software giant is now projected to spend $80 billion on data centers this year and has seen its trailing twelve-month CapEx balloon to over $69 billio

ROIC Comparison

With Microsoft being the prime example of extremely elevated CapEx levels, its ROIC has actually stabilized and remained flat over the last few quarters after noticeably declining in recent years to 23% although this is still above the admirable level of 20% or higher.

Surprisingly, Meta, Alphabet, and Amazon have seen an increase in ROIC, suggesting the market’s worries about their increased CapEx may be overdone, at least for now.

Amazon’s sharp uptick has certainly been reassuring as its ROIC has edged closer to 20% with Meta at 29% and Alphabet having the high at 31%.

EPS Revisions & Price Performance

Magnifying the promising rise in ROIC, Amazon’s increased profitability is standing out the most. Benefiting from a pleasant trend of positive earnings estimate revisions, it’s noteworthy that over the last 60 days, Amazon’s FY25 and FY26 EPS estimates are still up over 4% and 2% respectively, as shown below

While Alphabet has experienced an even sharper uptrend in EPS revisions, this appears to have already been priced into its stock, with GOOGL spiking over 20% in the last three months.

As for Microsoft, CapEx concerns are taking away from a slight rise in FY25 and FY26 EPS estimates. That said, Meta stock has been the laggard in recent months, which correlates with what has been an 18% drop in FY25 EPS estimates over the last 60 days, even though FY26 EPS revisions are up more than half a percentage point.

Conclusion & Final Thoughts

Amazon stock currently sports a Zacks Rank #2 (Buy), with the other Mag 7 hyperscalers landing a Zacks Rank #3 (Hold). Optimistically, these big tech stocks aren’t trading at a stretch to the benchmark S&P 500’s 26X forward earnings multiple, and their EPS growth has remained commendable and justifiable of a slight premium to the broader market.

Still, Amazon stock could be the best bet in regard to more short-term upside when reflecting on the trend of positive EPS revisions and the increasing ROIC to offset CapEx concerns. Amazon may also benefit the most from AI investments, not only in terms of boosting its market-leading AWS cloud services but also in streamlining its core e-commerce business.

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