Alphabet’s business kept expanding, but the surge in AI‑related infrastructure spending pushed its remaining cash into negative territory.
Free cash flow—the cash left after covering operations and investments—fell to –$5.9 billion (£4.3 billion), marking the first negative reading in at least ten years.
Alphabet now projects AI spending to reach as high as $205 billion this year, up from $190 billion, as tech rivals scramble to capture the next wave of AI innovation.
In the same quarter, Alphabet’s total revenue rose to $119.8 billion, a 23 % increase year‑over‑year.
Nevertheless, the stock slipped 4 % in after‑hours trading.
CFO Anat Ashkanazi told analysts that the negative free cash flow stemmed from rising capital outlays, virtually all tied to AI infrastructure.
She noted that second‑quarter outlays totaled $45 billion, with 60 % allocated to servers and 40 % to data‑center construction.
Capital expenditures stood at $36 billion in the first quarter.
Ashkanazi added that demand for AI continues to exceed current investment levels.
“As long as attractive opportunities appear, we will keep investing,” she said.
CEO Sundar Pichai described the AI transition as still being in the early innings of a multi‑sector shift, adding that the firm’s approach to generating returns on these investments remains disciplined.
“While frontier capabilities hold great promise, turning them into user‑ready experiences still requires considerable work—yet the potential rewards are extraordinary,” he said.
Rachel Winter, a partner at wealth‑management firm Killik & Co, noted that investors expressed surprise at the scale of Google’s spending.
“They expect total spending this year to fall between $195 billion and $205 billion,” she said. “Those are staggering figures, and the roughly 3.5 % after‑hours dip in the stock suggests some investor concern.”
Tesla, led by Elon Musk, also posted negative free cash flow of $1.1 billion for the second quarter, driven by rising investment costs.
This marks Tesla’s first negative free‑cash‑flow result in two years.
CFO Vaibhav Taneja told analysts that Tesla plans to spend up to $25 billion this year—more than double its capital outlay in 2025.
He characterized the current phase as a major investment cycle, predicting further spending increases over the next three years.
Tesla’s shares also fell 4 % in after‑hours trading.
