Google’s free cash flow turns negative amid AI spending

Google’s free cash flow turned negative in the second quarter of 2026, marking the first such quarter in the company’s history as a publicly traded business. Executives said Google ended the period with negative free cash flow of $5.9 billion, as spending on artificial intelligence pushed capital expenditures higher.

The company now expects to spend up to $205 billion in 2026, above its previous guidance of $180 billion to $190 billion. Alphabet CFO Anat Ashkenazi said capital expenditures will also “increase significantly in 2027.” Analysts expect that figure to reach at least $262 billion, according to Bloomberg.

Google’s AI infrastructure spending

“We expect that free cash flow will remain under pressure driven by our investments in technical infrastructure, which enable us to capitalize on the AI opportunity and continue to drive attractive returns.”

The spending reflects the broader AI investment boom, with the industry committing trillions of dollars to infrastructure for what companies describe as unprecedented demand. Some analysts and investors worry the buildout is too large and could produce limited returns. Free cash flow at the four AI hyperscalers—Google, Meta, Microsoft and Amazon—was expected to turn negative by 2027 after their latest capital-spending commitments.

That concern could also affect Nvidia, whose major customers include all four companies. Nvidia CEO Jensen Huang has sought to reassure Wall Street, saying in the company’s March earnings call that he was “confident” hyperscalers' cash flow would grow because “we have now seen the inflection of agentic AI and the usefulness of agents across the world in enterprises everywhere.”

Cloud growth and Gemini delays

Google’s cloud division offered a bright spot. Quarterly cloud sales reached $24.77 billion, up 82% from the same period last year, while total revenue rose 24%. Ashkenazi said demand was strong from external cloud customers and across Google’s own business.

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Search sales nevertheless fell short of investor expectations, despite CEO Sundar Pichai saying Search usage reached an all-time high this summer because of the World Cup. Google is also facing pressure in frontier AI. After the strong debuts of Gemini 3 and Nano Banana Pro in November 2025, the company has been quieter than competitors including Anthropic.

Google unveiled Gemini 3.6 Flash earlier this week, but it appears behind the latest OpenAI and Anthropic releases on most major benchmarks and trails Grok 4.5 on some tests. The promised Gemini 3.5 Pro is reportedly months late; Pichai said it is now in testing and teased Gemini 4, which is already being trained for a planned cadence of almost monthly model releases.