Alphabet reported second-quarter 2026 results on July 22 showing consolidated revenue up 24% year-over-year to $119.8 billion, but the company’s free cash flow fell into negative territory for the first time in its history as a public company, according to multiple market analyses of Alphabet’s financial filings since its 2004 initial public offering.
The shortfall was driven entirely by capital spending on AI infrastructure. Alphabet spent a record $44.9 billion on capital expenditures in the quarter, mostly on servers, data centers and networking equipment to support Google Cloud and its Gemini models. Operating cash flow of $39.1 billion wasn’t enough to cover that outlay, leaving free cash flow at negative $5.9 billion, chief financial officer Anat Ashkenazi told investors on the earnings call, calling it a direct result of the company’s infrastructure buildout.
Guidance raised again
Alphabet also raised its full-year 2026 capital expenditure guidance to a range of $195 billion to $205 billion, up from the $180 billion to $190 billion it had projected previously, citing “an acceleration in the delivery of capacity to meet growing demand.” Ashkenazi said the company expects 2027 spending to increase “significantly” further, and that free cash flow will “remain under pressure” as the buildout continues.
To help fund the spending, Alphabet raised $49.6 billion through a combination of Class A and Class C stock and mandatory convertible preferred stock in June, plus $20.3 billion through senior unsecured notes — proceeds it said were earmarked partly for scaling AI infrastructure and global computing capacity.
Still cash-rich
The company isn’t short on cash: it holds $242.5 billion in cash and marketable securities, and free cash flow over the trailing twelve months remains positive at $53.3 billion. Much of the spending is also translating into revenue growth elsewhere. Google Cloud revenue jumped 82% to $24.8 billion, helped by the first deliveries of Alphabet’s TPU chip systems to outside customers, and its cloud backlog swelled by more than $50 billion in the quarter to $514 billion.
CEO Sundar Pichai told analysts the company is “in very early innings” of a “secular shift” driven by AI, pointing to strong demand across consumer products, enterprise customers and developers as justification for the spending. The comments came a day after Google shipped new Gemini 3.6 Flash and Gemini 3.5 Flash-Lite models, part of a workhorse line the company says balances performance against cost.