Google parent Alphabet said its business has continued to grow in recent months, but rising costs on artificial intelligence (AI) infrastructure have pushed its remaining cash into negative territory.
The company’s free cash flow, the cash it retains after paying for operations and investments, was negative $5.9bn (£4.3bn) for the first time in a decade, according to the company’s past financial reports.
Alphabet’s artificial intelligence spending is expected to reach $205 billion this year, up from $190 billion, as major tech companies race to create a new wave of technology.
Meanwhile, Alphabet’s total quarterly revenue reached $119.8 billion, up 23% from the same period last year.
But the company’s shares fell 4% in after-hours trading.
Anat Ashkanazi, Google’s chief financial officer, noted on a call with financial analysts that the company posted negative free cash flow due to rising capital expenditures, virtually all of which were related to AI spending.
The company spent $45 billion in the second quarter, with 60% of costs going to servers and the remaining 40% to data centers, she said.
Alphabet’s capital expenditures totaled $36 billion in the first quarter of this year.
Ashkanazi said on the call that when it comes to AI, “demand continues to outpace investment.”
“As long as we see these attractive investment opportunities, we will continue to invest.”
Sundar Pichai, Google’s chief executive, said the technological shift toward artificial intelligence tools and capabilities still “feels like the beginning of a transition in many areas” and that the company’s plans to generate financial returns on its spending were “disciplined.”
“What I see as what you can do with advanced capabilities, there is still a lot of work to be done to translate that into an experience for our users. So this looks like an extraordinary opportunity with extraordinary returns.”
Tesla, the electric vehicle company controlled by Elon Musk, also reported negative free cash flow of $1.1 billion for the second quarter on Wednesday due to its own rising investment costs.
It was the first negative cash balance in two years, according to the company’s financial statements.
Vaibhav Taneja, Tesla’s chief financial officer, said on a call with analysts that the company will spend about $25 billion this year, more than double its 2025 capital expenditures.
He added that Tesla is in a “big investment cycle” and that its costs are likely to increase further over the next three years.
Tesla shares also fell 4% in after-hours trading.