Google parent Alphabet has continued to grow its business in recent months, but rising investment in artificial intelligence infrastructure has turned cash flow negative. Alphabet’s free cash flow, defined as cash remaining after operating and investing activities, came in at negative $5.9 billion for the latest quarter, the company’s historical records show. Executives said AI-related capital expenditure is driving the drag, with most spending directed toward hardware and data centers.
Alphabet’s AI outlays are now expected to reach as much as $205 billion this year, an increase from $190 billion previously anticipated, as major tech players race to capitalize on a new wave of AI technology. Revenue stayed robust, with quarterly revenue totaling $119.8 billion, up about 23% from a year earlier, though the stock traded lower in after-hours trading amid the spending push.
Anat Ashkanazi, Google’s chief financial officer, told analysts that the negative free cash flow reflects growing capital expenditure, essentially all tied to AI. She noted the company spent $45 billion in the second quarter, with roughly 60% allocated to servers and 40% to data centers. Alphabet’s capital spending for the first quarter was $36 billion.
On the AI push, Ashkanazi said, “the demand still outpaces that investment,” adding that as long as compelling opportunities exist, the company will continue to invest. CEO Sundar Pichai described the AI transition as still in the early innings across multiple areas and emphasized a disciplined approach to monetizing the associated investments.
Separately, Tesla reported negative free cash flow of $1.1 billion for the second quarter due to a ramp-up in investment, its first period of negative cash flow in two years. CFO Vaibhav Taneja said the company could spend as much as $25 billion this year, more than double 2025 capital expenditure, with plans to increase investment further in the coming years. Tesla’s stock also fell about 4% after hours on the news.
Investors will be watching how Alphabet translates AI investments into user experiences and returns, while the broader tech sector assesses whether the AI spending cycle sustains earnings momentum for peers as well.
