Alphabet Posts Record Profit but Becomes Cash Flow Negative Amid AI Investments
Alphabet reported a record quarterly profit of $112 billion, driven largely by unrealized gains from its investments in SpaceX and Anthropic. However, the core business excluding these gains still performed well, with Google Cloud growing by 82%. Despite this strong performance, Alphabet's stock fell nearly 7% as it became cash flow negative for the first time in its history. Management also warned of significantly higher capital expenditures in 2027. The company disclosed over $800 billion in purchase commitments and obligations, including $51 billion spent supporting other companies' data centers. This led several analysts to cut their price targets for Alphabet's stock, with only Barclays raising its target. The negative sentiment spread across the tech sector, affecting Microsoft, Amazon, Nvidia, Tesla, and others. Analyst Gil Luria acknowledged that while investors overreacted to the cash flow milestone, he remains cautious about valuation concerns and interdependent AI investments among major players like Google, Amazon, Anthropic, Microsoft, OpenAI, and Nvidia. Despite this, consumer and business spending on AI has surged to $120 billion annually from zero two years ago.
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Topics: AI investment Alphabet cash flow negative Wall Street reaction