Google parent Alphabet posted robust quarterly financial results, but the scale of its investment in artificial intelligence overshadowed the earnings report as the company recorded negative free cash flow for the first time in at least a decade.
The technology giant reported quarterly revenue of $119.8 billion, a 23% increase from the same period a year earlier. Despite the strong top-line performance, investors reacted cautiously after the company revealed that rising capital spending tied to AI infrastructure had pushed free cash flow to negative $5.9 billion.
Shares of Alphabet fell about 4% in after-hours trading as markets weighed the company’s accelerating spending plans against its otherwise healthy financial performance.
AI investment continues to accelerate
Alphabet has steadily increased spending to expand the computing capacity needed to support its growing portfolio of AI products and cloud services.
The company now expects capital expenditures to reach as much as $205 billion this year, raising its previous forecast and underlining the intense competition among major technology companies racing to build advanced AI systems and the data centres required to power them.
During a conference call with analysts, Chief Financial Officer Anat Ashkenazi said the negative free cash flow reflected higher capital expenditures, with nearly all of the increase linked to AI-related investments.
Strong business performance despite higher costs
Although infrastructure spending dominated investor attention, Alphabet’s underlying businesses continued to perform well.
The company benefited from strong demand across its cloud computing operations, where AI services have become an increasingly important driver of growth. Its core advertising business also remained resilient, helping lift overall revenue beyond analysts’ expectations.
The latest results suggest that Alphabet’s existing businesses continue to generate substantial revenue even as the company commits unprecedented sums to expanding its AI capabilities.
The broader AI spending race
Alphabet’s investment strategy reflects a wider trend across the technology sector. Companies including Microsoft, Amazon and Meta have all committed tens of billions of dollars toward AI infrastructure, seeking to secure computing power, specialised chips and new data centres as demand for generative AI continues to grow.
For investors, the key question is whether these enormous upfront costs will translate into sustainable long-term returns. While AI products are becoming more deeply integrated into search, cloud computing and enterprise software, many companies are still in the early stages of turning those investments into consistent profits.
What comes next
Alphabet has indicated that AI spending will remain elevated as it continues expanding its infrastructure and developing new products. Investors are expected to closely monitor future earnings to assess whether rising revenue can keep pace with the growing cost of building and operating large-scale AI systems.
For now, the latest quarter illustrates both sides of the AI boom: strong business growth on one hand and an increasingly expensive race to build the technology that could shape the industry’s future.
