Google\u2019s free cash flow for the second quarter of 2026 turned negative for the first time in the tech giant\u2019s history as a publicly traded company, driven by record spending on artificial intelligence.<\/p>\n
Google ended the quarter with a negative free cash flow of $5.9 billion, company executives shared in the earnings call, and updated expectations to spend up to $205 billion in 2026, up from previous guidance of $180 billion to $190 billion. The capital expenditures will also \u201cincrease significantly in 2027,\u201d parent company Alphabet\u2019s chief financial officer Anat Ashkenazi said on the call. Analysts expect that number to at least hit $262 billion, according to Bloomberg<\/a>.<\/p>\n The reason? Usual suspect: the AI investment boom.<\/p>\n \u201cWe expect that free cash flow will remain under pressure driven by our investments in technical infrastructure, which enable us to capitalize on the AI opportunity and continue to drive attractive returns,\u201d Ashkenazi said.<\/p>\n The tech industry is pouring trillions of dollars into building out supply for what they claim is unprecedented AI demand. But some<\/a> experts fear the investment is simply too big and unwarranted, raising fears of a potential AI bubble. The free cash flow of the four AI hyperscalers -Google, Meta, Microsoft and Amazon- was expected to go negative by 2027 after the eye-watering capex commitments announced in the last round of earnings. Some investors are worried that Silicon Valley might be recklessly burning through cash in its AI buildout goal with limited returns. If the returns on that investment don\u2019t pan out as expected, it\u2019s bound to hit Nvidia\u2019s financials as well, considering that the chipmaker counts all four hyperscalers as major customers.<\/p>\n That\u2019s why Nvidia CEO Jensen Huang has spent the last couple of months trying to ease Wall Street worries<\/a> over this scenario, going on to say in the company\u2019s earnings call in March<\/a> that he is \u201cconfident\u201d that the hyperscalers\u2019 cash flow will grow, because \u201cwe have now seen the inflection of agentic AI and the usefulness of agents across the world in enterprises everywhere.\u201d<\/p>\n That fear is also one of the likely reasons why Apple, which has largely steered clear from the AI spending gold rush at the expense of lagging peers, has outperformed<\/a> its hyperscaler peers in the stock market and even briefly dethroned Nvidia<\/a> as the most valuable company last week.<\/p>\n To quell worries at least a bit for Google fanatics, the company did provide numbers showing a pretty robust cloud business. Cloud sales hit $24.77 billion for the quarter, up a whopping 82% from last year.<\/p>\n \u201cWe are seeing very strong demand both from external cloud customers as well as across the business, and our goal is to invest as long as we see an attractive return on that investment,\u201d Ashkenazi said.<\/p>\n Despite the success on the cloud side and the 24% overall revenue growth, sales came in below investor expectations for the company\u2019s bread and butter, Search. That\u2019s even though Google CEO Pichai said Search usage hit an all-time high this summer thanks to the World Cup.<\/p>\n Also putting pressure on Google is its performance in the AI products scene.<\/p>\n Google burst onto the frontier AI models scene with Gemini 3 and its image generator Nano Banana Pro last year, causing much of the internet to question<\/a> whether OpenAI\u2019s leading position in the industry was officially under threat from the tech giant. But since the stellar debuts in November 2025, the company has been rather silent as competitors like Anthropic<\/a> boast flashy debuts one after another.<\/p>\n