Alphabet's AI bets boost cloud sales but yield first negative free cash flow

Alphabet reported a mixed second quarter: Google Cloud revenue surged 82% to $24.77 billion, beating expectations, while the company recorded its first-ever negative free cash flow of $5.9 billion due to heavy AI infrastructure spending Source: portafolioco. Net income reached $112.1 billion, boosted by investment gains, but the market reacted negatively, sending shares down about 3% after hours Source: infobae.

Cloud and AI drive growth

Google Cloud was the standout, with revenue of $24.77 billion (up 82%) and a tripling of operating profit to $8.8 billion Source: portafolioco. Alphabet also reported that its Gemini AI assistant now has 950 million monthly active users Source: lavanguardia. Total revenue grew 24% to $119.8 billion, but search advertising revenue of $63.27 billion slightly missed estimates Source: larepublicaco.

Soaring capital expenditure

Capital expenditure in Q2 reached $44.9 billion, with 60% on servers and 40% on data centers Source: elconfidencial. Annual CapEx guidance was raised to $195–205 billion, more than double 2025's $74.5 billion Source: lavanguardia. CFO Anat Ashkenazi cited "accelerating delivery of capacity to meet strong demand" and warned pressure on margins would continue Source: elconfidencial.

Investor jitters

Despite record cloud growth and net income, investors focused on the negative free cash flow and escalating spending. Alphabet's stock fell 0.5%–3% in after-hours trading Source: larepublicaco. Analysts noted that while revenue acceleration is positive, the market demands visible returns from AI investments Source: portafolioco.