Alphabet’s Q2 capital expenditures hit $205 billion, pushing free cash flow negative for the first time amid AI infrastructure spending.
Alphabet reported a 24% year-over-year revenue increase to $119.8 billion in Q2, exceeding estimates, driven by an 82% surge in Google Cloud revenue to $24.8 billion. Operating income for the cloud segment reached $8.8 billion, with margins near 35%, narrowing the gap with rivals Microsoft Azure and Amazon AWS.
The company’s capital expenditures soared to $205 billion, resulting in its first quarterly negative free cash flow. A $514 billion cloud backlog underscores strong demand, but $250 billion in off-balance-sheet obligations signals future financial commitments. Investors now weigh near-term cash flow pressures against long-term AI infrastructure investments.
Shares reacted to the mixed signals, with focus shifting to the sustainability of Alphabet’s spending spree as it competes in the AI arms race.