Alphabet reported its first quarter of negative free cash flow as a public company, burning through $5.9 billion in the three months to June even as revenue jumped 24 percent to $119.8 billion. The milestone, disclosed in second-quarter earnings on Wednesday, marks a turning point for a business long regarded as a cash-generating machine. The immediate trigger was a doubling of capital expenditure to $44.9 billion, almost all of it directed at AI servers, data centres and networking gear. Finance chief Anat Ashkenazi then raised the full-year capex guidance by $15 billion, to a range of $195–205 billion, and signalled that spending would increase again in 2027. The stock fell roughly 3 percent in after-hours trading.

The spending is already producing revenue. Google Cloud, the unit that houses the company’s AI infrastructure and enterprise tools, grew 82 percent to $24.8 billion, well ahead of analyst forecasts. Search advertising, still the core business, rose 17 percent to $63.3 billion, though it narrowly missed expectations. The Gemini AI app now claims 950 million monthly active users, closing in on ChatGPT’s estimated 1 billion. Chief Executive Sundar Pichai told analysts that AI-powered features were driving an incremental increase in search queries and that the company would accelerate the release of new models, including the delayed Gemini 3.5 Pro and the next-generation Gemini 4.

A $98 billion line item in “other income” — largely unrealised gains from early bets on SpaceX and Anthropic — quadrupled net profit to $112.1 billion, but investors largely looked through it. Analysts in New York and London noted that the paper windfall obscured a more modest operating performance, with operating earnings per share coming in slightly below consensus. The negative cash flow and the capex hike reinforced a growing unease on both sides of the Atlantic: that the hyperscalers’ race to build AI infrastructure is transforming their balance sheets faster than the revenue can follow.

Viewed from Silicon Valley, the results set a tense backdrop for the rest of Big Tech earnings season. Meta, Microsoft and Amazon report next week, and together the four firms are on track to spend roughly $700 billion this year. The question is no longer whether AI demand is real — cloud backlogs and usage metrics confirm it is — but whether the current pace of investment can be sustained without eroding shareholder returns. The next factual milestone is the Federal Reserve’s policy meeting next week, where persistently high oil prices and the capital-intensive turn of the tech sector will feed into the inflation and rates outlook.