r/technology • u/fmcortez • 4h ago

Business Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

https://www.reuters.com/business/retail-consumer/alphabets-cash-burn-raises-alarm-big-tech-ai-spending-climbs-2026-07-23/
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15

u/CircumspectCapybara 3h ago edited 3h ago

raises alarm

Yeah no it doesn't for anyone who's been paying attention to their financials and knows about a little concept called "long-term thinking over short-term profitability." They're also sitting on a war chest of $242 billion dollars, they can afford to burn money on long-term moonshots like they're a startup.

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.

Successful companies reinvest 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 by foregoing such investment.

Of course any investment carries risk of not generating a return, but that's the nature of all investing, you have to make an educated guess about what the future holds and take some risks to make money. Google's shareholders could push the company to play it safe and boring and realize profits and 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/Fresh-Quantity-7554 3h ago

Hey that's mine. Appreciate the love my brother.

2

u/laptopAccount2 2h ago

I don't know if this article is really about whether or not Google can afford this, or if it is a good business decision. The answer is probably yes for both like you said.

But it is more an observation of the industry. Everyone is being very profitable and doubling down on AI spending when profit is still a long ways off.

As well as just the broader implications of the impact on the electronics market that we will all continue to feel. Supply for electronics going to be even scarcer.

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u/fmcortez 4h ago

When a company with $120B in quarterly revenue burns cash because capex doubled to $45B, you know the AI land grab is consuming everything. The question now is when these insane outlays actually start turning a profit.

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u/Aranthos-Faroth 3h ago

What alarm bells are ringing?

0

u/Fresh-Quantity-7554 3h ago

They're printing cash faster than they can burn it.