Alphabet Reports Strong Q2 Earnings but High AI Investments Concern Investors
Alphabet (GOOGL) delivered a strong second-quarter performance with revenue rising 24% year-over-year to $119.8 billion, driven by growth in Google Search and YouTube advertising as well as an 82% increase at Google Cloud. Despite these positive results, investors are focused on the company's significant capital expenditures tied to AI infrastructure expansion. The firm now expects its 2026 capex to reach $195–$205 billion, with further increases expected in 2027 as it continues investing heavily in data centers and hiring for AI initiatives. These costs are impacting free cash flow (FCF), which turned negative at -$5.9 billion during the quarter due to high spending. While Alphabet's management remains confident in its long-term strategy, concerns persist over whether these investments will maintain profitability or strain financial flexibility. The company has maintained dividend payments and showed no signs of cutting them despite FCF pressures.
Topics: AI spending Alphabet GOOGL Google Cloud stock performance