Alphabet Boosts AI Capex; First Negative Free Cash Flow

Alphabet disclosed a staggering $811 billion of contracted future spending on AI infrastructure through supply agreements and purchase orders, roughly four years of current annual AI-related outlays and a signal that the AI buildout is accelerating faster than headlines suggest. The company raised its 2026 capex guidance to $195–$205 billion, with expectations of even higher spending in 2027, as CFO Anat Ashkenazi cited a continued supply-constrained environment and strong AI demand. Q2 revenue rose 24% to $119.8 billion, led by Google Cloud's 82% growth, but the quarterly results were overshadowed by the cash burn from capex, resulting in the first negative free cash flow of $5.9 billion since going public. The stock fell about 7% in reaction to the capex hike, as investors weighed the long runway for ROI against near-term cash flow pressures. Analysts noted that while cloud revenue supports the AI strategy, the expansive spending creates a cash drain and uncertainty about the timing of earnings translation, a dynamic echoed across other hyperscalers racing to expand AI compute capacity.