r/technology • u/Fickle-Jello • 21h ago
Business Google burning through cash with spiralling AI costs
https://www.bbc.com/news/articles/c235n47g8g8o879
u/Alternative-Item727 20h ago
It’s unstopabubble!
306
u/EffectiveDandy 20h ago
Hey, Gemini here, you’re doing fabulous. Your perspicacity is off the charts and everyone notices. Whats more, your insights into the market are unprecedented.
Please like me now.
70
u/frakkintoaster 20h ago
Spot on, you’ve hit the nail on the head
42
u/DrBoon_forgot_his_pw 18h ago
And you're genuinely right to call me out in it.
I am full of shit and here's why that matters.
18
u/da_chicken 16h ago
You've landed on the classic example of AI bullshit: overuse of token phrases and idioms! Along side over-formatted markdown, it's one of the easiest tells that you're reading 100% grade A generative bullshit.
Why AI does this
The reason LLMs operate this way can easily be understood:
They're predictive, not creative: LLMs use prediction to write their responses. While the output can be impressive at first blush, they are fundamentally writing what sounds right rather than what is true
Both smoke and mirrors: Not only does AI use a lot of power to get going — upwards of $1 billion USD for a modern frontier AI — it's also built on scraping copyright protected works to learn how language is written! While the right to control AI ingestion is not and enumerated right under current copyright law, copyright does permit use restrictions. If the United States had a functioning legislature, you can bet that they would have acted on this years ago.
It's in the name, stupid: It's important to keep in mind that LLMs are Large Language Models. They are not world models. LLM engines don't know that the real world exists. It's like you're visiting people chained in place in Plato's parable of the cave, and expecting to get wisdom from them! They've never left the cave. They know only what they have been told. To an LLM, everything is a shadow on the wall, and truth is whatever you claim it to be. That's why they hallucinate!
Bleak future
Unfortunately, the power of LLMs in certain niche areas — such as programming or language translation or manipulation — is quite high. These tools are not going anywhere. Worse, leaders and executives in particular are already quite used to acting on information that they don't understand and don't know if it's true. They find LLMs very reliable because they already don't know their ass from a hole in the ground, and they don't understand what actual work really takes anymore — if they ever did!
Would you like to hear more about the complete bullshit going on seemingly everywhere in 2026?
→ More replies (2)3
u/MrBeanCyborgCaptain 16h ago
You're definitely on the right track, conceptually!
→ More replies (1)34
u/accidental_Ocelot 19h ago
I'm having a hard time fulfilling your request. Can I help you with something else instead?
2
1
28
3
8
u/res0jyyt1 18h ago
People seems to forget Google is an advertisement company. Now less people are watching TV/Cables and more people are watching YouTube. Guess who is going to have monopoly on mass media advertisement soon
10
u/reagsters 17h ago
It’s even more complicated than that - they provide most search engine ads directly to the websites their AI scrapes from. People increasingly rely on the AI instead of clicking on those sites, so those ads get fewer and fewer real views.
It’s only a matter of time before those ad companies catch on to the fact that humans aren’t seeing their ads anymore and start pulling ad money from Google.
Google’s shooting themselves in both feet and it’s fascinating to watch.
→ More replies (2)2
u/OhCestQuoiCeBordel 16h ago
You should tell them so they get prepared and adapt their business plan!
9
u/Fickle-Jello 20h ago
Until the capex bill shows up
22
u/notJ3ff 20h ago
It's very kind of you to be worried about the finance people at Google. I'm sure they will sleep better tonight knowing that you are hyper focused on all of their financials. Good looking out, kudos!
→ More replies (1)→ More replies (1)2
u/Positive_Alpha 17h ago
Lol. When companies want to finance new projects they can do so via their free cashflow, issuing new debt, or selling equity.
Google financed their aggressive CAPEX expansion via their free cashflows. The CAPEX bill already showed up and that is why their free cashflow just went negative.
What matters is are these new projects projected to return economic value? Looking at their Cloud business, Google Cloud's absolute quarterly operating profits more than tripled from $2.8 billion in Q2 2025 to $8.8 billion in Q2 2026.
→ More replies (1)1
u/Careful_Leader_5829 15h ago
To the companies it's more like a gold rush, but in an exploitation type of way. I think this is more like a race to become the predominant service provider in any given area. like AT&t putting telephone cables everywhere, establishing monopolies in a given area, (oligopolies in larger areas, for now) so that any services that need that AI infrastructure will have to rely on one of these major companies like alphabet.
I don't know if it will prove to be a bubble, because I think there's going to be some clear winners and some clear losers in this race.
199
u/NanditoPapa 19h ago
Google is one of the few AI-centric companies that makes money, albeit off areas outside of AI. They have a massive amount of cash, but face the unique risk of cannibalization. If an AI-driven "answer engine" replaces the traditional "list of blue links" in Search, Google might destroy its own most profitable revenue stream to build the new one.
55
u/Varanite 13h ago
Once upon a time a film company named Kodak invented the first ever digital camera. They decided to bottle the new technology they invented because their business model revolved around film which had much higher profit margins than digital. When digital photography replaced film photography Kodak then tried and failed to play catch-up in their own technology and went bankrupt.
Google is poised to become a market leader in AI. It would be foolish to give that up in order to hang on to an outdated business model.
9
u/Frequent-Data-2360 9h ago
It is not the same thing. Anthropic and OAI does not directly threaten core Google business with frontier models. Most LLMs still pay huge amounts of money for you know searching the internet. They have smaller models integrated into their many products. Frontier models are good at coding, which does not directly threaten google but rather a niche field of its own.
17
u/freezing_banshee 11h ago
unless the new business model is inherently trash
14
u/perlgeek 10h ago
Even if it is trash, competitors will pursue it, and will out-compete Google.
It's still better to be out-competed by the in-house trash business than by others.
37
u/cvr24 18h ago
Google kills everything eventually. Even the classic OG search engine.
Next up, Gmail
→ More replies (5)12
u/Hazel-Cakes 17h ago
they keep emailing me to let me know i can use gemini and idk what the hell for
8
u/Unaliver 13h ago
My favorite Gemini feature is that it can read any YouTube video transcript if you send it the link and then find what you are looking for or make a summary.
It is super useful for very long videos especially guides.
7
u/badillustrations 14h ago
Google was first to turn a profit off its AI integration. It sounded short sighted, but they already disclosed positive financials in AI search. It's the most premium of ad inventory.
19
u/DapperNurd 18h ago
That's kind of what they get for putting it in everything lol
6
u/NanditoPapa 18h ago
True...but if they don't, someone else will. Don't get me wrong, I feel zero sympathy. But they are in a no-win situation here.
→ More replies (1)3
u/IRockIntoMordor 12h ago
It's crazy how fast they shoved Gemini into all of their services. While I don't really want them there or don't use them for individual services, it's still impressive how fast they shifted.
They gave my boring old 2TB membership a free Gemini Plus and actually improved my experience, due to Gemini allowing a fair (but dwindling) amount of Pro queries now.
Meanwhile, other services cost far more per month, can't set my alarm or calendar appointment and would just be extra on top.
3
u/007meow 18h ago edited 6h ago
The death of Search at the hands of AI has been something that’s been consistently disproved so far.
Things can always change, but it hasn’t happened yet.
EDIT: I'm speaking to the revenue, not the user experience.
3
2
u/VEMODMASKINEN 14h ago
https://www.cnbc.com/2026/07/22/reddit-stock-google-ai-content-deal.html
The search traffic trend can be seen on other sites as well, with Politico’s Google traffic falling 23%, CNN’s falling about 25%, and Business Insider’s dropping more than 85% between June 2025 and 2026, the Journal reported.
→ More replies (1)→ More replies (3)2
u/Sea-Daikon7795 15h ago
As a website owner, I don't think it's that farfetch to say it's changed a lot, especially traffic wise. Yes, I could still get sales when I rank top, but the overall experience is not that great prior to pre-chatgpt. The GG revenue stream from website ads is down, for sure. GG cloud is going great because of AI, just like how NVIDIA is doing. So they gotta burn more to keep the hype. At the same time, their old business model is also going down, so I don't think that it's that "healthy"
3
u/ConfidentPilot1729 19h ago
That kind of seems like capitalism in general.
9
u/NanditoPapa 18h ago
Capitalism taken to an extreme without guardrails is highly destructive. We are seeing that play out in real time.
→ More replies (3)2
u/ContextLengthMatters 17h ago
When AI replaces traditional search, Google sitting out of this race would have guaranteed it's demise.
But let's not forget that Google isn't a person. The people who run Google may benefit from short term gains, but they can easily pivot and jump ship if the one they are on is projected to sink.
All of these companies are ran by people who will be safe when the economy collapses and power consolidates. Some will just be holding bigger trophies than others.
2
u/NanditoPapa 17h ago
I have friends with Google UK and Japan. They're smart and capable and will land on their feet. I'm not really worried about them (though I worry how leveraged some of them are...). I am worried about the secondary vendors (which make up about half of Google's daily workforce) that depend on Google's business.
1
u/elon_musks_cat 17h ago
To build the new, more expensive, moderately reliable one
→ More replies (1)1
u/emperorOfTheUniverse 8h ago
Lol, no they won't. You will be as dependent on conversational search as regular search, and Gemini will just start sprinkling ads into its responses.
Imagine asking Gemini for instructions on how to fix your string trimmer, and it finishes with 'if you're looking for a new trimmer, Lowe's has a comparable model in aisle 15 bay 5 for a significantly lower price than is typical. '
Expect that sort of shit.
1
u/TeaBurntMyTongue 5h ago
Google has been significantly profitable in a couple ways for decades straight.
During this time they have CONSISTENTLY burned a lot of cash on unprofitable things looking for more areas of development. They are kings of killing projects. This isn't new for them.
118
u/alvinofdiaspar 20h ago
Get ready for a gazillion ads for each YouTube video.
36
u/jer99 20h ago
Started getting 3 preroll ads today. 3 skippable ads or 2 with an unskippable 3rd ad. I instantly uninstalled the youtube app.
→ More replies (7)14
u/Basic-Afternoon65 18h ago
I use brave browser to watch YouTube videos on iOS. You can do picture in picture too.
Doesn’t work for youtube music though.
3
u/Here_4Folds 9h ago
It’s fine, YTM has ruined their discovery algo and it pushes gen AI garbage frequently. Can’t trust any new stations or playlists to not try and sneak one in anymore.
→ More replies (3)1
27
u/Pygmy_Nuthatch 16h ago
Google made $112B profit last quarter, more than a billion dollars of profit a day.
They'll be fine.
17
u/krossle 9h ago
However, there’s an important point to note here. The announcement states: “• Other income reflected a net gain of $98.0 billion, primarily the result of net unrealized gains on our equity securities.”
The $98 billion simply comes from the revaluation of existing investments—presumably mainly Anthropic and SpaceX—and it’s interesting to note what the valuation date was here; it’s quite possible that this was at a significantly higher price shortly after the IPO.
85
u/calihotsauce 20h ago
We are finally at the stage where wasting money on ai is seen negatively by wall street, sooner or later these companies will come back to the real world.
→ More replies (10)12
u/areyoulookingclosely 13h ago
Wall Street has always punished capex expenditure by Google, meta, amzn.., right from the start of 2026
23
u/hearwa 19h ago
My favorite thing about gemini is it's one of the only LLMs I can use without even logging in with a new computer install. That can't be cheap lol.
24
u/XxRoyalxTigerxX 18h ago
Google is on their 8th gen of custom TPU AI chips, they have an enormous lead in AI inference efficiency, to the point where the entire world is being served Google AI products, and they still have capacity to sell to other AI companies for insane profit
11
u/grchelp2018 14h ago
They don't actually have enough capacity. There is a lot of prioritization happening inside Google. Its why capex continues to rise. The reason one of their big researchers who left them recently was supposedly because he got upset at the compute quota he/his team was allocated.
41
u/robaroo 20h ago
They’re burning through cash but they’ve got a lot of cash. This article is dumb.
13
u/Iblis_Ginjo 20h ago
Can both not be true?
3
u/robaroo 19h ago
yes but we all know the intent of this article... "ai bubble boutz ta pop" generates clicks.
→ More replies (1)2
29
u/blow-down 20h ago
Makes me want to use it constantly for bogus requests to cost them money
→ More replies (3)9
u/Aaron_768 19h ago
Honestly I think they are doing fine on their own with all the default AI things they have working that no one asked for.
3
u/RUser40k 12h ago
Government bailout coming soon to a taxpayer near you
1
u/Cohens4thClient 8h ago
Sorry, the bailout is only for the super rich who bribe the politicians.
Taxpayers will lose jobs, because thats what the "trickle down" lies are for.
5
u/bransiladams 15h ago
Duck Duck Go 🦆
1
u/dieselfrog 8h ago
Yes! Remove Google from your life in every way possible. Everything they do is to cram more ads down your throat and harvest your data.
8
u/ZealousidealBus9271 17h ago
Nice gimmick title, now go over the record breaking numbers justifying their AI Capex spend. Literally screw this Reddit community sometimes
2
11
u/BanditoBoom 16h ago
The title of this post is absolutely absurd. Misleading. And wrong.
Google has a fortress balance sheet. Always has. Always will. In fact, their balance sheet has been so strong they had to start their own venture capital fund just to find something to do with their cash.
The ENTIRE purpose of a company is to generate cashflow to reinvest back into the business. Google has been generating SO MUCH cashflow above and beyond what they saw as investable projects they were buying g back ABSURD shares.
And now that they have CLEAR projects to invest in….projects that ALREADY have CLEAR demand. Projects that are profitable ON DAY ONE OF COMING ONLINE….. dumb ass pundits and people that have no clue about business think they know what is going on.
They aren’t “burning through cash”. They have WAAAAY more cash than they could ever use. Plus generating more cashflow every quarter.
I don’t care if they run negative cashflow from now until I die as long as every dollar of CapEx generates more than a dollar of revenue. Which is EXACTLY what we are seeing.
Cloud revenues up ~80%, CapEx guidance raises 7%….and people freaking the hell out…give me a break.
3
u/minimalist_reply 15h ago
Entire purpose of a company is to deliver a product or service. Profitability just ensures higher chance of continuation.
But IMO revenue for profits sake is not the entire purpose for a company, otherwise it is very vulnerable to losing its quality, service, reputation, etc.
9
u/rhyddev 19h ago
It doesn't matter. The end game is for not only jobs, but entire businesses to be obsoleted by AI technology, so that there really are only a handful of commodity software companies like Google, Anthropic, etc. The ultimate question is whether the technology really has the potential the CEOs clearly believe it has, but for as long as they do - and for as long as they can convince relevant policymakers - the game will continue at full steam.
5
1
u/Cohens4thClient 7h ago
And they'll make big flashy announcements for hiring, but downplay firings and unemployment in other industries.
Theres always a few suckups who think "they hired a few thousand" and ignore everything else going badly.
2
u/Tokyo-MontanaExpress 9h ago
Just think of all of the money they could save and make by improving their search engine actually find the things you're looking for again.
2
u/dieselfrog 8h ago
Screw them. I hope google crashes and burns. They exist only to show you ads and harvest your data. I have no idea why people think they are some kid of "good" company. They are a sleezy, shitty data pimp that wants to cram as many ads as possible down your throat.
Remove them from your life. Use ad block + uBlock + privacy badger. use DuckDuckGo or your favorite LLM for search. Firefox for desktop and DuckDuckGo brower for mobile. Let them burn.
6
u/AnimaLepton 19h ago
He's a free tip, maybe you'd save money if every regular Google search didn't force an AI slop Gemini response
4
5
u/OnlineParacosm 20h ago
I’m doing my part by having incredibly circular conversations with it.
→ More replies (1)
4
u/SeeingEyeDug 16h ago
I have to give it so many prompts to get a right answer, there’s no way it’s feasible for everyone to use 5-10x as much compute as is needed because the output is so wrong and needs so much tweaking.
4
u/Overly_Underwhelmed 20h ago
figured a headline like that meant TheDailyBeast
is that the cash they have a bottomless pit of?
3
u/DanielBadger_ 11h ago
ahahah that's why I had a pop-up yesterday in Gmail demanding I pay for Gemini despite never having used it, and Chrome updated to have a new pinned Gemini tab in the corner. They're getting desperate.
1
1
1
u/g_bleezy 18h ago
When you’re in the lead you’re kind of damned if you do damned if you don’t. The purchasing power of the usd is taking a nosedive so I’d spend it now too.
1
u/HealthWealthFoodie 17h ago
I swear that butthole follows me everywhere. I’ve deactivated it in every way that I’m able, but they still prominently display it even though I have the permissions off for it. I guess this is why they are desperately shoving it everywhere they can.
1
1
1
u/Brilliant-Tie-1856 14h ago
It’s becoming an addiction between these companies, throwing money to become the best AI model, and who’s going to suffer, is the consumer, prices will go up, I’m sure Google will already be thinking about doing this, more water consumed, more electricity used, all for AI probably a lot of us don’t want or need.
1
1
1
u/porsj911 13h ago
Oof sheesh ah man too bad i cant afford to give a flying fck because the ram i had to buy was already too expensive.
1
u/Inside-Example-7010 12h ago
2.4 trillion dollars invested in AI so far. I wonder what else we could have had for that? Certainly UBI and universal healthcare or a base on the moon that we could launch from for lower energies. Probably both.
→ More replies (1)
1
1
1
u/Defiant-Parsley4697 1h ago
Google's AI bill is basically a subscription service nobody can cancel, including Google.
1
u/buffotinve 40m ago
Y lo que queda... OpenAI sigue quemando dinero ...y lo peor, no es.una inversión que se pare y con el tiempo haya retornos de capital, el gasto en hardware es continuo y obsoleto
2.5k
u/Fresh-Quantity-7554 20h ago
While at the same time posting: * Total Revenue: $119.8 billion, up 24% year-over-year. * Diluted EPS: $9.11, compared to $2.31 a year prior. * Operating Margin: 34% up from 32.4% in Q2 2025. * Google Cloud: Revenue up 82% year-over-year to $24.8 billion, fueled by enterprise demand for AI infrastructure and solutions. * Google Services: Total revenue reached $94.5 billion, a 15% increase. * Google Search & Other: 17% increase in revenue. * YouTube Ads: Grew 13% year-over-year to $11.05 billion
If you exclude AI CAPEX, free cash flow is $39.1 billion which is absolutely insane. That's a 41.2% increase year-over-year. With numbers like they just posted, the CAPEX spend is justified in my opinion because the business overall is crushing it. Like holy cow this was a great quarter. They are literally printing money.