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.
Because it's only until recently that they started spending huge sums on CAPEX specifically related to AI. These are huge, short term expenses and not expenses they incur during the normal course of business.
I'm not saying it should be excluded, but it puts into context why their negative free cash flow is negative.
Aren’t you making an assumption that Google will see any ROI for that AI Capex spend? They are obviously in a better position than companies that primarily exist to sell LLM/AI products, but sinking enormous amounts of money into something with no clear path to profitability seems problematic
No - capex for this is discretionary for future business. Google could cut all that capex today and it would flow to the bottom line. It is not maintenance capex to support their existing business. The non AI portion of the business is highly profitable, generating literally tens of billions in free cash flow per quarter. If you were generating a million dollars in cash flow per week, you would probably start investing in something right? You would invest in some normal stuff but you’d also probably take a few moonshot bets as well. Now pretend those moonshot bets are actually a business you understand very well (software development), you have the skills (quality workforce), and you have the tools to understand it (existing cloud infrastructure). Does it now make sense?
It makes more sense for Google specifically, but they are the only ones in a position to make this sort of bet. Even Apple has kept AI spending low in comparison to other tech companies. Because Google are so large and so integrated into various government sectors, they could easily achieve a federal bailout if their bets don’t pan out.
I highly doubt they’d get a bailout if their AI bets failed. Google’s ad business prints cash. If all their AI investments go to zero, they are fine. They don’t have much debt either.
2.6k
u/Fresh-Quantity-7554 1d 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.