- Alphabet spent $36bn on capex in Q1 2026.
- In Q2 2026, Alphabet's capex increased to $45bn, with 60% allocated to servers.
- Google has raised its 2026 capex forecast to between $195bn and $205bn.
- Following the earnings reports, stocks of Alphabet and Tesla dipped 4% and 3% respectively in after-hours trading due to concerns over AI spending.
- Alphabet's free cash flow turned negative for the first time in a decade, reaching negative $5.9bn.
- Alphabet's spending on AI is projected to reach $205bn this year, up from a previous estimate of $190bn.
- Despite the increase in spending, Alphabet reported a 23% increase in quarterly revenue, totaling $119.8bn.
- CFO Anat Ashkanazi indicated that the negative free cash flow was primarily due to growing capital expenditures related to AI.
- Mizuho analysts noted that Google's capex increase was broadly anticipated and linked to a surge in cloud revenue, which jumped 82% year-over-year.
Google's parent company, Alphabet, has significantly increased its AI capital expenditure forecast for 2026 to between $195 billion and $205 billion, up from previous estimates of $180 billion to $190 billion.
This surge in spending comes as the company reported a negative free cash flow of $5.9 billion for the first time in a decade, despite a 23% increase in quarterly revenue to $119.8 billion.
Chief Financial Officer Anat Ashkanazi attributed the negative cash flow to rising capital expenditures, primarily related to AI investments, which accounted for 60% of the $45 billion spent in the second quarter.
She emphasized that 'the demand still outpaces that investment,' indicating a commitment to continue investing in AI infrastructure.
CEO Sundar Pichai echoed this sentiment, stating that the shift towards AI tools is still in its early stages, with 'extraordinary opportunities' ahead.
Despite the revenue growth, Alphabet's stock fell 4% in after-hours trading, reflecting investor concerns over escalating costs.
Mizuho analysts noted that the capex increase was 'broadly anticipated' and highlighted a surge in cloud revenue, which jumped 82% year-over-year, helping to alleviate some market fears about AI overspending.10
As the tech sector braces for earnings season, AI spending remains a focal point for investors.
“Alphabet's free cash flow turned negative $5.9bn in Q2, its first deficit in a decade, as capital spending hit $45bn, with 60% going to servers. Meanwhile, Alphabet shares fell 4% in after-hours trading despite cloud revenue surging 82% and Gemini usage accelerating.”
CNBC
