Alphabet, Google's parent company, said it will continue to accelerate investment in AI infrastructure this year, with capital expenditure expected to reach as much as $205 billion. [Reuters]
Alphabet, Google's parent company, said it will continue to accelerate investment in AI infrastructure this year, with capital expenditure expected to reach as much as $205 billion. [Reuters]

Alphabet, Google's parent company, said it will continue pouring money into large-scale AI infrastructure this year, with capital expenditure (CapEx) set to reach as much as $205 billion.

The company disclosed Wednesday that second-quarter sales climbed 24 percent from a year earlier to $119.8 billion, surpassing the $116.9 billion market consensus compiled by the London Stock Exchange Group (LSEG).

Second-quarter capital expenditure came in at $44.9 billion, roughly in line with the market estimate of $44.8 billion. Alphabet spent between $22 billion and $24 billion per quarter in the second and third quarters of last year, before stepping up to $28 billion in the fourth quarter and $36 billion in the first quarter of this year. In the second quarter, capital expenditure roughly doubled compared with the same period a year ago.

Chief Financial Officer Anat Ashkenazi said on an earnings call Wednesday that the company was raising its full fiscal-year 2026 capital expenditure guidance from a range of $180 billion to $190 billion to a new range of $195 billion to $205 billion. She attributed the increase to investment needed to meet rising AI demand, and added that capital expenditure would continue to expand significantly next year.

The surge in capital spending pushed Alphabet's second-quarter free cash flow to negative $5.86 billion — the first time the figure has turned negative since the company's 2004 listing. Over the trailing 12 months, however, free cash flow stood at $53.3 billion.

Alphabet has also been issuing bonds in rapid succession to fund its AI investment, causing its debt load to swell sharply. Ashkenazi said total debt had grown from around $16 billion a year ago to nearly $100 billion, and added that the company conducted a share offering last month as debt levels climbed steeply.

Alphabet CEO Sundar Pichai said the company's AI investment "is redefining the horizon of what's possible across every domain," adding that the strong results "demonstrate that our differentiated, full-stack AI approach is delivering real, measurable value to customers."

Pichai said roughly 90 percent of Fortune 100 companies have adopted the enterprise version of the Gemini model, highlighting Google's progress in the AI market. He also noted that the Gemini app has reached 950 million monthly active users.

Despite the better-than-expected results, Alphabet's shares fell sharply on the day. Its Class A common stock dropped 1.46 percent during regular trading, then slid more than 3 percent further in after-hours trading following the earnings release.


kate01@heraldcorp.com