Google spent so much on data centres that its free cash flow went negative
Alphabet closed the second quarter with free cash flow of minus 5.9 billion dollars after doubling infrastructure spending, then raised its guidance for the rest of the year.
Alphabet had an excellent quarter and the market punished it anyway. Revenue rose 24%, cloud grew 82% — numbers most companies on earth would take without blinking — and the shares still fell. One line is to blame: capital spending.
Why did Alphabet’s free cash flow turn negative?
Because the company spent more building infrastructure than the business threw off. In the second quarter, purchases of property and equipment doubled year on year to 44.9 billion dollars, against 39.1 billion dollars of cash generated by operations. The arithmetic does what arithmetic does: free cash flow of roughly minus 5.9 billion dollars. For Google’s parent, a money printer for two decades, that is unfamiliar territory.
How much will Alphabet spend in 2026?
Between 195 and 205 billion dollars, by the company’s own guidance, revised up from the 180 to 190 billion it had promised earlier. The official explanation is that capacity is arriving faster than planned because demand will not let up. The less flattering reading is that nobody in the sector knows where the ceiling of this race is, and that stopping first is the genuine risk.
What does this say about the AI race?
That the cheap phase is over. Microsoft is funding Mistral’s data centres in Europe, Google is building chips tailored to Gemini so each answer costs less power, and Portugal is preparing industrial zones to host these computing warehouses. Everyone is building at once, with money that only pays back if demand for artificial intelligence keeps growing at today’s pace.
Investors are not panicking. They are still buying the growth story. What they have started asking is when the infrastructure bill fits back inside what the business generates. The full numbers sit in Alphabet’s investor relations pages, and the answer to that question is the most interesting thing the next few quarters will produce.
By Beatriz Mota
Image: Chad Davis / Wikimedia Commons (CC BY 2.0)
