In the second quarter, Alphabet increased its revenue by 24% to $119.8 billion. However, due to substantial investments in AI infrastructure, the corporation recorded a negative free cash flow for the first time in its public history, amounting to minus $5.9 billion.
Overall, the company spent $45 billion: 60% of the funds went to servers, and the remaining 40% to data centers.
Alphabet has already raised its annual AI spending forecast to $195-205 billion, up from the previous $10 billion.
Nevertheless, the period from April to June marked the twelfth consecutive quarter of double-digit revenue growth for the company. Operating profit increased by 30%, and the margin expanded by two percentage points to 34%.
The company’s net profit rose to $112.1 billion, with diluted earnings per share reaching $9.11. A significant factor in this was the unrealized revaluation of equity securities.
Alphabet and Google CEO Sundar Pichai attributed the results to AI being integrated into the company’s key products, highlighting Search, where users are transitioning to a unified search experience based on AI Overviews and AI Mode. He also noted the growing audience of the Gemini chatbot.
Google Cloud remains the main driver of the quarter. The division’s revenue surged by 82% to $24.8 billion. Alphabet explained the acceleration by the demand for Google Cloud Platform in the corporate AI infrastructure segments.
Pichai described the quarter as indicative for the business direction, stating that the cloud’s performance is a key indicator that AI investments are already translating into commercial demand.
“Judging by what we see in advanced technologies, we have a lot of work ahead to bring this to life and provide users with unforgettable experiences. So, these look like exceptional opportunities with exceptional returns,” added Alphabet’s CEO.
Investors viewed the quarter as strong in terms of revenue and cloud performance but were cautious about the new spending trajectory. Following the report’s release on June 22, Alphabet’s (GOOG) shares fell by 4.28% in after-hours trading.
In June, Alphabet announced plans to raise $80 billion through a stock offering. The funds will be directed towards scaling AI infrastructure.
