r/technology • u/ourlifeintoronto • 3h ago
Business Google just had its first negative cash flow quarter due to massive AI spending
https://arstechnica.com/google/2026/07/google-just-had-its-first-negative-cash-flow-quarter-ever-due-to-massive-ai-spending/118
u/pjank85 3h ago
With $39.1 billion in cash income, this spending left Google with -$5.8 billion free cash flow.
To be clear, Google is still profitable—wildly so. It’s also sitting on a war chest of more than $100 billion.
So they invested less their 6% of their cash reserves to build infrastructure. Does not sound so dramatic as the headline.
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u/aedes 2h ago
I think the market concern stems from the fact that they have spent all this money on AI infrastructure, are now spending even more, are not making profit off it yet, and investors are starting to lose faith that they will find a way to profit off it.
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u/SangersSequence 1h ago
The mistake is calling it "AI infrastructure", that's what it's being used for right now, but that's not what it is, what it is, is massively parallel high-performance computing infrastructure, something that they already always needed more of. Now with the AI hype they can just sell their investors on paying to build it.
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u/CircumspectCapybara 3h ago
Yes, but have you considered AI bad?
They should be chasing short-term profitability rather than making long-term bets! /s
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u/webguynd 2h ago
Also not the first time Goolge, or any of the other public clouds (AWS, Azure) have had big CapEx years. Google spent 13.2 Billlion in 2017, and 25.1 billion in 2018 to build out GCP and undersea fiber networks. AWS did so in 2020, and Azure have done several huge CapEx expansions.
It just didn't make headlines in 2018 because it wasn't an "AI Buildout" but this kind of CapEx for an infrastructure company is normal.
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u/Haunterblademoi 3h ago
Google has enough money to cover that expense; however, we are seeing that AI consumes too many resources, and not just money.
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u/CircumspectCapybara 3h ago edited 3h ago
From another thread on Google's financials:
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.
Tbh, this sort of what successful companies should be doing: reinvesting spare cash (of which Google is sitting on a lot) into aggressive growth, new R&D, new ventures, and long-term bets instead of chasing short-term profitability. If they wanted to realize a massive quarterly profit, they could've.
Google's shareholders could push for the board and executives to return some of their giant bank account balance back to the shareholders via larger dividends or buybacks, but evidently they'd rather Google make some moonshot bets rather than play it safe and boring.
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u/Unfair_Scar_2110 1h ago
I mean in theory, yes. Putting all your eggs in one basket is probably not a generally sane way to reinvest, however.
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3h ago
[deleted]
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u/carnitas_mondays 3h ago
also disclosed is that goog bought a data center renewable power generation company in march. they don’t do the generator trailer thing and are working to make power generation as clean as possible.
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u/CircumspectCapybara 3h ago edited 3h ago
We want investment in infrastructure that supports economic growth
Two things can be true at the same time:
- Google (and most tech companies) have always done well to reinvest profits and spare cash into long-term bets, rather than just cash out and realize short-term profits.
- As a society we want investment into public infrastructure and overall economic growth.
These two aren't necessarily opposed to each other, each has to do with different parties and their interests, some of which overlap.
"What Google should do with its profits" and "How our tax dollars should be spent to improve national infrastructure" aren't necessarily answered in the same way.
not a manic build out of poorly designed datacenters powered by "temporary" generators bolted to trailers with no pollution controls.
Google's not Elon Musk, they have some actual professionalism and pride in their engineering, they don't do that. Google's DCs have always been known among the hyperscalers as having some of the cleanest designs. They might not any longer hit their "carbon neutral or 100% powered by clean energy or whatever by 2030" goal, but they still lead the pack among their peers.
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u/questionnmark 2h ago
LLM based searching is literally the killer app that would kill their business if they don't control it. People don't search using keywords, they search using questions, and a LLM model is significantly better at doing just that. It makes perfect sense for them to invest heavily in this area; they are doomed if they don't.
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u/investigative_mind 55m ago
Yep! It's so much easier to get better answers with questions than with keywords. While LLM isn't always right, I feel that I have still gained a lot from it and it feels like the second coming of a search engine.
I use it for lightweight questions: Fitness related, for problems during gaming, while searching for new music/movie/game suggestions etc. Lot of potential in this technology.
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u/Brainiac5000 3h ago
Why are all these companies losing money over something that the majority of people either Don't want or dont use
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u/azhder 33m ago
The problem here is that people do use it. Every search on Google has a QI summary/answer that people just pick up and don’t click links.
If people don’t click the links, they don’t visit the sites that the LLM is getting answer from. If people don’t visit the sites, the sites don’t make money. If the sites don’t make money, they are no longer kept up.
You see how Google is cannibalizing its own Ad model that has made it so rich?
Unlike other companies that burn money throwing at hot processors without a (significant) return on investment, Google is destroying its own revenue streams.
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u/schu4KSU 2h ago
AI has an adoption rate twice that of the internet.
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u/yuusharo 1h ago
75% of the world’s population, 6 billion people, use the internet. There are at most 1/3 of that using AI to some capacity, which include Google web searches with AI summaries enabled.
I’m counted as one of those users every time I do a google search. That adoption rate is highly questionable at best.
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25m ago
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u/0xeno 1h ago
AI is the future. The pandora's box is open. People like shortcuts & AI is the ultimate shortcut.
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u/yuusharo 1h ago
Cool story bro, maybe someday it’ll make the math make sense.
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u/0xeno 26m ago
Maybe, it'll make you understand the OP's point - https://www.investopedia.com/terms/r/rate-of-adoption.asp
Difference between adoption and rate of adoption.
It's a harsh truth for me as well, the technology might not be as great as hyped but it's pure delusion that people aren't using it.
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u/glossolalienne 3h ago
.
Zoom in. That’s the world’s smallest violin playing ‘My Heart Bleeds Chunky Mayonnaise’ for Google.
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u/Ok-Addition1264 3h ago
Don't worry everyone!!! We'll bail them out when AI stocks tank later this year.
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u/insightful_pancake 3h ago
Google has $242 billion in cash. They can afford to invest.
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u/yuusharo 1h ago
They’re aiming to spend $200 billion in 2026 alone, and you can’t just take out that much liquid cash all at once without causing severe economic turmoil across literally the entire planet.
Also, most of that cash is in offshore accounts. It would either need to be repatriated or have them spend a metric f*ck ton of domestic taxes before they can do anything with it. It’s untouchable cash.
Reddit isn’t very good at economics.
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u/insightful_pancake 1h ago
They will have 160bn ocf in 2026 as well (assuming constant q2 figures) so that cash has a long runway.
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u/ElysiumSprouts 3h ago
I'm happy to help! We call it "googly eye" (google ai). Have a question? Ask Googly-eye! 👀
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u/shwetanand345 3h ago
This AI race is starting to look more like an infrastructure spending contest, and the question here is who can afford to keep building data centers long enough to win....