Big Tech companies are adjusting their accounting for server depreciation, which significantly impacts reported net income. Amazon reduced the useful life of its servers from six to five years starting January 1, 2025, citing rapid technological obsolescence due to AI. This change is expected to increase depreciation expenses by $1.4 billion and reduce net income by $1 billion in 2025.
Meta chose to extend the useful life of its server and network assets to 5.5 years, up from a previous range of 4 to 5 years. This adjustment is projected to decrease depreciation by $2.92 billion and boost net income by $2.59 billion for 2025. Meanwhile, Alphabet maintains a six-year useful life for its servers, and Microsoft utilizes a range of 2 to 6 years.
Analysts warn that if these four companies were to shorten their useful-life assumptions by one year, their combined net income could drop by approximately $36 billion in 2027. Based on current valuation multiples, this shift could theoretically impact market capitalization by nearly $800 billion. AI-related capital expenditures have already reached hundreds of billions of dollars across the sector.
