Google Burns Through Cash With Spiralling AI Costs

Google parent Alphabet saw its business continue to grow in recent months, yet growing spending on artificial intelligence (AI) infrastructure put its leftover cash into negative territory.

Alphabet’s free cash flow, the cash it maintained after paying for operations and investments, was negative $5.9 bn (£4.3 bn) for the first time in at least a decade, according to its past financial records.

The company’s AI spending is now expected to reach $205 bn this year, up from $190 bn, as major tech firms race to build the next generation of the technology.

Meanwhile, Alphabet’s combined quarterly revenue hit $119.8 bn, up 23% compared with the same time last year. However, the stock fell 4% in after‑hours trading.

CFO Anat Ashkanazi explained on a call with financial analysts that the negative free cash flow stemmed from growing capital expenditures, primarily linked to AI. She said the company spent $45 bn in the second quarter, with 60% directed to servers and the remaining 40% to data centres.

When asked, Ashkanazi said the demand for AI still outpaces investment and that the company will keep investing as long as attractive opportunities exist.

CEO Sundar Pichai noted that the shift to AI tools feels like early innings across multiple areas and that the company’s plans for financial returns remain disciplined. He added that frontier capabilities still offer “extraordinary opportunities with extraordinary returns” as they translate into user experiences.

Tesla also reported negative free cash flow for the second quarter of $1.1 bn. CFO Vaibhav Taneja said the company would spend up to $25 bn this year, more than double its 2025 capex, and that spending could rise further over the next three years. Tesla’s stock also dropped 4% in after‑hours trading.