Google burning through cash with spiralling AI costs

Published 22 July 2026 · tech

Google parent Alphabet saw its business continue to grow in recent months, yet growing spending on artificial intelligence (AI) infrastructure put its leftover cash into

Google parent Alphabet saw its business continue to grow in recent months, yet growing spending on artificial intelligence (AI) infrastructure put its leftover cash into negative territory. The company's free cash flow, the cash it maintained after paying for operations and investments, came in at negative $5.9bn (£4.3bn) for the first time in at least a decade, according to its past financial records. Alphabet's spending on AI is now expected to hit as much as $205bn this year, an increase from $190bn, as major tech companies race to build around a new wave of the technology. Meanwhile, Alphabet's combined quarterly revenue hit $119.8bn, up 23% compared with the same time last year.

But the company's stock fell 4% in after hours trading. Anat Ashkanazi, Google's chief financial officer, noted on a call with financial analysts that the company had shown negative free cash flow due to growing capital expenditures, essentially all of which was related to AI spending. She said the company spent $45bn in the second quarter, with 60% of the cost going towards servers and the remaining 40% going towards data centres. Alphabet's capital spending was $36bn in the first quarter of this year. Ashkanazi said on the call that when it comes to AI, "the demand still outpaces that investment". "As long as we see these attractive opportunities to invest, we will continue to invest." Sundar Pichai, Google's chief executive, said that the technological shift to AI tools and capabilities still "feels like early innings in a shift across multiple areas" and that the company's plans around generating financial returns on its spending were "disciplined".

"What I see with what you can do with frontier capabilities, there is still a lot of work left to do to translate that into experiences for our users. So that looks like extraordinary opportunities with extraordinary returns." Tesla, the electric vehicle company controlled by Elon Musk, also reported negative free cash flow on Wednesday of $1.1bn for the second quarter due to its own increasing investment costs. It was the company's first negative showing of leftover cash in two years, according to its financial records. Vaibhav Taneja, Tesla's chief financial officer, said during a call with analysts that the company will spend as much as $25bn this year, more than double its capital spending in 2025.

He added that Tesla was in "a big investment cycle" and that its spending would probably increase further over the next three years. Tesla's stock also dropped by 4% in after hours trading.