Overview
- Alphabet reported a strong second quarter but turned its free cash flow negative after a roughly $44.9 billion quarterly capex outlay, a development disclosed in its July earnings that drove investor reassessment.
- Management raised full-year 2026 capex guidance to about $195–$205 billion and said 2027 spending will be higher, a move that coincided with large equity and debt raises and a suspension of the company’s share buyback program.
- Google Cloud showed striking demand with roughly 82% revenue growth, a backlog above $500 billion and nearly 500 Gemini enterprise customers processing heavy token volumes, evidence executives cite to justify rapid capacity builds.
- Markets reacted with a sharp selloff in Alphabet and broader tech names as analysts flagged risks that hyperscaler capex could outpace combined free cash flow and raise long‑term interest expense and execution risk.
- Investors are now focused on upcoming earnings from Microsoft, Meta and Amazon as near‑term tests of whether hyperscaler AI spending converts into durable revenue and positive cash flow or prompts a wider sector revaluation.