Alphabet, the parent company of Google, reported a negative free cash flow of $5.9 billion for the second quarter, marking its first such deficit in at least ten years. The company attributed the result to increased capital expenditures aimed at artificial intelligence (AI) infrastructure. Alphabet's quarterly revenue rose 23% year-over-year to $119.8 billion, though its stock price declined approximately 4% in after-hours trading following the announcement.
Chief Financial Officer Anat Ashkanazi informed analysts that AI-related investments reached $45 billion in the second quarter, with 60% allocated to servers and 40% to data centers. The company revised its annual investment forecast upward, now expecting to spend between $195 billion and $205 billion this year. Ashkanazi stated that market demand for AI currently outpaces the company's investment levels.
Chief Executive Sundar Pichai described the current period as the "early innings" of a technological shift. He stated that the company remains disciplined in its spending and anticipates significant returns as AI capabilities are integrated into user experiences. However, some market analysts noted investor concern regarding the scale of the expenditures.
The report follows a similar trend at Tesla, which also reported a negative free cash flow of $1.1 billion for the quarter due to AI and infrastructure spending. Tesla officials indicated that their capital spending will reach $25 billion this year as they continue a three-year investment cycle.