Google Spent a Lot on AI, Even With $120 Billion in Earnings

Google made $120 billion last quarter, but it was not enough to cover its AI spending. The company is investing a lot in AI.

Alphabet, Google's parent company, said it had negative free cash flow of $5.9 billion in the second quarter of 2026. This is the first time the figure has been below zero since the company went public. Google made $39.1 billion in operating cash flow but spent $44.9 billion on projects, mostly for AI servers and data centers. Google's AI products need a lot of equipment to work. The company is spending a lot on this.

Google is still making a lot of money. The company made $119.8 billion in revenue in the second quarter of 2026, which is 24% more than last year. Its operating income was $40.8 billion, and its net income was $112.1 billion. Google's revenue is increasing.

However, most of the profit came from investments, not the main businesses. The company made $98 billion from investments, mostly from unrealized gains. These gains are from assets that increased in value but were not sold.

Free cash flow shows how much money Google has left after expenses and investments. The company usually makes billions of dollars in free cash flow each quarter. But this time, its infrastructure costs were higher than its income.

Google does not plan to slow down its spending.

The company increased its expected spending for 2026 to $195-205 billion. This is more than twice what it spent in 2025. Google had previously said it would spend $180-190 billion in 2026.

The spending will continue to grow next year. The Chief Financial Officer said capital expenditures will increase significantly in 2027.

The CFO said free cash flow will remain under pressure due to investments in technical infrastructure. This will help Google capitalize on AI opportunities and drive returns.

Where is all the money going?

About 60% of Google's technical infrastructure spending went to servers, and 40% went to data centers and networking equipment.

Google needs more capacity to meet demand from cloud customers and support its products. The company's Cloud revenue increased by 82% to $24.8 billion, and its operating income more than tripled to $8.8 billion.

Google's other businesses are also growing. Search advertising made $63.3 billion, YouTube advertising made $11.1 billion, and revenue from subscriptions and devices reached $12.9 billion.

Google is not the only company spending a lot on AI. Google, Amazon, Microsoft, and Meta will invest over $700 billion this year, mostly in data centers and chips.

Investors were not reassured by Google's growth. Alphabet shares fell nearly 7% after the company raised its spending forecast.

Google has a financial cushion, but its infrastructure spending will climb again in 2027. This may not be the last quarter where Google's AI spending is higher than its income.

Topics: Artificial Intelligence, Google, Google Gemini

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