For the first time in at least ten years, Alphabet’s leftover cash after operations and investments came in at negative $5.9bn (£4.3bn).
The company’s combined quarterly revenue hit $119.8bn, up 23 per cent year-on-year, but investors were concerned about the high levels of AI expenditure, sending Alphabet’s stock down four per cent in after-hours trading.
Chief Financial Officer Anat Ashkanazi explained that capital spending—essentially all AI-related—was the main driver of the negative cash flow.
In the second quarter alone, Alphabet spent $45bn, with 60 per cent going toward servers and 40 per cent toward data centres. First-quarter capital spending had already reached $36bn.
Highlighting the company’s commitment to the long-term AI vision, Ashkanazi said: "As long as we see these attractive opportunities to invest, we will continue to invest."
CEO Sundar Pichai added that the AI shift is still in its early innings and described the technology as offering "extraordinary opportunities with extraordinary returns", while stressing disciplined planning around monetising these investments.
Analysts noted that the scale of spending has raised eyebrows. Rachel Winter of Killik and Co said: "They said that this year the total they will spend will be between $195bn and $205bn. These are huge numbers… the share drop suggests concern about those levels."
Alphabet’s struggles mirror those of other major tech firms. Tesla, which reported negative free cash flow of $1.1bn in Q2 due to a surge in investment costs, is undertaking a massive $25bn investment in 2026—more than double its 2025 capital spending.
Tesla’s stock also fell four per cent after its results were released.
Despite short-term cash pressures, Alphabet and Tesla view their heavy spending as necessary to capture long-term gains from AI and related technological shifts.
For Google, the strategy reflects a bet that the frontier AI infrastructure it is building today will underpin future revenue streams and user experiences for years to come, even if it comes at the cost of immediate financial flexibility.
