AI ate all the cash
Alphabet’s business continued to grow last quarter, but its huge spending on AI pushed its free cash flow below zero for the first time in at least a decade.
Google’s parent company reported negative free cash flow of $5.9bn (£4.3bn).
This means it spent more cash on running the business and making investments than it generated during the quarter.
Alphabet now expects to spend between $195bn and $205bn this year, up from its earlier estimate of $190bn, as it builds more servers and data centres for AI.
Revenue was still strong, rising 23% compared with last year to $119.8bn.
However, Alphabet shares fell around 4% in after-hours trading as investors reacted to the level of spending.
Chief financial officer Anat Ashkenazi said Alphabet spent $45bn in the second quarter, up from $36bn in the first. Around 60% went on servers, while the remaining 40% went on data centres.
She said demand for AI was still growing faster than Alphabet could invest, and that the company would keep spending while it saw good opportunities.
Chief executive Sundar Pichai said the shift towards AI was still at an early stage.
He added that Alphabet was focused on making money from its investment, but still had more work to do to turn advanced AI into useful products.
In brief:
Alphabet’s quarterly revenue rose 23% to $119.8bn.
Its AI spending could reach $205bn this year.
Alphabet and Tesla both reported negative free cash flow as investment costs increased.
Saw the receipt and adjusted their posture
Tesla also reported negative free cash flow of $1.1bn during the quarter, its first negative result in two years.
The company expects to spend up to $25bn this year, more than double what it spent in 2025.
Tesla finance chief Vaibhav Taneja said the company was in a major investment period and expected spending to rise further over the next three years.
Tesla shares also fell around 4% in after-hours trading.
That’s a fat wad. - MV