Alphabet burns $5.9 billion in cash as AI spending eclipses revenue growth
Heavy investment in AI infrastructure has forced Alphabet to pause share buybacks and increase debt, signalling a strategic shift in how the tech giant funds its expansion.
Alphabet, the parent company of Google, has reported its first negative free cash flow quarter since its initial public offering in August 2004. Between April and June 2026, the company burned $5.9 billion in cash, a deficit driven by capital expenditure that significantly outpaced its operational cash generation. This marks the end of a 22-year streak where the company consistently generated more cash than it spent in every quarter.
The primary driver of this cash burn was a $44.9 billion investment in artificial intelligence infrastructure, including chips, servers, and data centres. This expenditure averaged $490 million per day and was double the amount spent in the same period the previous year. During the quarter, Alphabet generated $39.1 billion in cash, leaving a shortfall that the company addressed by raising approximately $70 billion through equity and debt markets.
To fund these operations, Alphabet sold $49.6 billion in stock, including preferred shares carrying a 6.25% dividend, and issued $20.3 billion in bonds. Consequently, long-term debt has risen sharply to $98.2 billion, up from approximately $16 billion a year ago. The company also paused share buybacks for the first time, having repurchased $13.2 billion in shares during the same quarter last year. This shift means the company is now pulling in more capital from investors than it is returning to them.
Despite the cash flow deficit, Alphabet’s revenue grew 24% year-on-year to $119.8 billion. Google Cloud was a standout performer, with revenue jumping 82% to $24.8 billion and operating profit increasing from $2.8 billion to $8.8 billion. The company’s cloud backlog reached $514 billion, with management expecting more than half of this to be booked as revenue within two years.
Earnings per share were reported at $9.11, but $6.26 of this figure was attributed to a one-off $99 billion paper gain on held stocks. Adjusted earnings per share stood at approximately $2.85, roughly in line with analyst expectations. The company raised its full-year capital expenditure guidance to between $195 billion and $205 billion, up from the previous range of $180 billion to $190 billion. Following the announcement of the raised spending plan, Alphabet’s stock fell 4.24% in after-hours trading.
