Google’s AI spending pushes free cash flow negative

Google reported $119.8 billion in revenue for the second quarter of 2026, exceeding analysts' expectations. But a surge in spending on artificial intelligence infrastructure pushed the company into negative free cash flow for the first time since it went public.

Google spent $44.9 billion during the quarter expanding its AI capacity. That investment exceeded the company’s $39.1 billion in operating cash flow, which was up 40% from a year earlier, leaving free cash flow at negative $5.8 billion.

Google’s revenue breakdown

Search remained the company’s biggest business, generating $63.3 billion. Google Cloud brought in $24.8 billion, up 23.8% from the previous quarter as demand grew for cloud-based AI services. Subscriptions, platforms and devices contributed $12.9 billion, while YouTube advertising generated $11.1 billion.

The company has sharply increased its capital-spending forecast for the year. Google initially projected $180 billion to $190 billion in 2026 capital expenditures for building and expanding infrastructure, but has now raised that estimate to $205 billion. In 2025, it spent $91 billion on those efforts.

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Investors react to rising AI costs

Google remains profitable and holds more than $100 billion in cash reserves, so the negative free cash flow does not represent an operating loss. It reflects current infrastructure investments exceeding the cash generated during the quarter.

Investors nevertheless pushed Google’s stock down by about 4.5%. The company says elevated spending will continue; its current capital expenditures are roughly six times their 2022 level, before the AI boom accelerated. The central financial question is how quickly those investments can become profitable as competition among AI model developers intensifies.