The Hook
Between 2022 and 2024, Microsoft, Alphabet, Meta, and Oracle each extended the assumed useful life of their servers and networking equipment from roughly four years to five or six. The accounting effect: spread the same capital expenditure over more years, reduce annual depreciation, report higher operating income. No new product, no new customer, no additional revenue. Just a longer number in a footnote.
The Question
If AI hardware is obsoleting faster than prior generations — as the companies' own capex guidance implies — why are the same companies extending the assumed life of that hardware?
The Paper Trail
The benefit shows up company by company in the filings: Microsoft disclosed roughly $3.7 billion in added operating income in the first year of its extension; Alphabet disclosed a depreciation reduction of approximately $3.4 billion. Then the contradictions appeared: Amazon, in 2025, shortened its assumed server life to five years, citing AI's accelerating pace of obsolescence — triggering an approximately $920 million accelerated depreciation charge. In the same period, Meta extended its assumed server life to approximately 5.5 years, producing an approximately $2.9 billion reduction in depreciation expense.
Both companies are right, or one of them is wrong. They cannot both reflect economic reality for the same category of asset in the same market cycle.
The Synthesis
The useful-life assumption is the most consequential line in a tech company's depreciation footnote and the one most investors skip. When the assumption moves in the direction of higher reported profit, the question to ask is whether the change reflects a genuine belief about how long the asset will remain productive — or whether it reflects what the EPS target requires.
Michael Burry and other public short-sellers have identified the depreciation gap as a material analytical line. The gap between Amazon's and Meta's concurrent moves is the clearest evidence in the public record that at least one of these assumptions is not about the hardware.