Alphabet, Google’s parent company, has seen its business grow, but extravagant spending on artificial intelligence (AI) infrastructure has pushed its free cash flow into negative territory for the first time in a decade.
The tech giant’s free cash flow came in at a loss of $5.9 billion (about £4.3 billion) for the quarter, a hit that has dented investor confidence.
Last year, Alphabet’s AI spend was projected to reach $190 billion, but this year the expense is expected to top $205 billion, as firms compete to pioneer the next wave of AI capabilities.
Alphabet posted a 23 % rise in revenue to $119.8 billion, yet the shares slid 4 % in after‑hours trading, reflecting the sector’s unease about capital outlays that drive short‑term cash flow deficits.
CFO Anat Ashkanazi said on a lender call that most of the current quarter’s $45 billion spend was allocated to servers (60 %) and data centres (40 %). She added that when AI demand outpaces investment, the company will keep allocating funds, pledging disciplined economics to public‑market returns.
CEO Sundar Pichai characterised the AI transition as an early‑innings phase, emphasising the company’s disciplined approach to capture extraordinary opportunities with “extraordinary returns.”
Tech peers are not far behind. Tesla, for instance, flagged a $1.1 billion negative free cash flow this quarter – the first such loss in two years – as it ramps up spending that may reach $25 billion this year, a more than twofold jump over 2025 levels.
Together, these figures illustrate how tech behemoths are backing larger AI endeavours even as they incur short‑term negative cash flow, betting that the next generation of services will deliver long‑term value.
