Alphabet has raised its full-year capital expenditure forecast to as much as $205 billion, signalling an even greater commitment to artificial intelligence (AI) infrastructure despite growing investor concerns over the sustainability of its spending.
The Google parent now expects capital expenditure for 2026 to range between $195 billion and $205 billion, up from its previous guidance of $180 billion to $190 billion. The increased investment comes as the company accelerates the expansion of its AI infrastructure to support growing demand across its products and cloud business.
Chief Financial Officer Anat Ashkanazi attributed the company’s negative free cash flow to the sharp rise in capital expenditure, which reached $45 billion during the second quarter, compared with $36 billion in the previous quarter.
According to media reports citing company financial records, Alphabet’s free cash flow fell to negative $5.9 billion after accounting for operating and investment activities, marking the first time in roughly a decade that the company has recorded a negative figure.
The increased spending unsettled investors, with Alphabet shares declining in pre-market trading on Thursday amid concerns over how quickly the substantial AI investments will translate into sustained financial returns.
Chris Ballard, Managing Partner at Check Capital, said the results reflected a broader shift in investor expectations for the technology sector.
”For the broader tech sector, Alphabet’s quarter sets a clear precedent: the market is transitioning from AI hype to monetisation discipline. Hyperscalers must demonstrate that heavy capital expenditure outlays deliver measurable enterprise adoption,” Ballard said.
Despite the concerns, Alphabet delivered a strong financial performance in the second quarter.
The company reported earnings per share of $9.11, comfortably exceeding analysts’ expectations of $2.88. Revenue increased 24 per cent year-on-year to $119.8 billion, ahead of the consensus estimate of $116.52 billion.
Operating income rose 30 per cent, while the operating margin expanded to 34 per cent, extending Alphabet’s streak to 12 consecutive quarters of double-digit revenue growth.
Google Cloud remained the company’s fastest-growing business, with revenue surging 82 per cent to $24.8 billion as businesses increased spending on AI infrastructure, AI solutions and core cloud services.
Revenue from Google Services grew 15 per cent, supported by continued expansion in Search, YouTube advertising and subscription services.
Alphabet also reported that Google Cloud’s backlog reached $514 billion, driven by a sharp increase in enterprise demand. The company said it had more than doubled the pace of new customer acquisition compared with a year earlier, while existing customers expanded spending beyond their contractual commitments by more than 50 per cent.
Chief Executive Officer Sundar Pichai said the company’s AI investments were delivering tangible benefits across its business, pointing to rising adoption of Gemini and increased usage across Search, Google Cloud and YouTube.
”We’re winning new customers, more than doubling our acquisition velocity year-over-year,” Pichai told investors during the company’s post-earnings conference call.
While Alphabet’s latest results demonstrated strong revenue growth and expanding profitability, investors are expected to continue scrutinising whether its record AI spending can generate sustainable long-term returns.
