Mountain View, 23 July 2026 — EBM Newsdesk Analysis — By Nick Staunton
On 22 July, Alphabet reported quarterly revenue of $119.8bn, up 24%, and free cash flow of minus $5.9bn. It is the first negative quarter since the company listed in 2004. Capital spending reached $44.9bn in three months, which is more than Google spent in the whole of 2022, and management raised full-year guidance to between $195bn and $205bn. The hyperscaler spending race has now done something it had not managed before.
For twenty years the defining feature of Google’s accounts was that the company produced more cash than it could sensibly use. That is no longer true, and the way Alphabet has chosen to fill the gap matters more for European investors than the headline number does.
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SubscribeWhere the money went
The mechanics are simple enough. Alphabet generated $39.1bn of operating cash in the quarter. It spent $44.9bn on property and equipment, overwhelmingly servers, data centres and network gear. Subtract one from the other and you get the $5.9bn hole.
This is not a business in trouble. Search revenue rose 17% to $63.3bn. YouTube advertising rose 13%. Operating income climbed 30% to $40.8bn, and the operating margin held at 34%. Alphabet still sits on $242.5bn of cash and marketable securities.
The cash burn is a decision, not a symptom. That distinction is the whole story.
Google has become a borrower
Here is the part that deserves more attention than it is getting. A company with a quarter of a trillion dollars in the bank has spent this year raising money.
In June, Alphabet priced an equity raise of $84.75bn, upsized from $80bn two days after announcing it. Berkshire Hathaway took $10bn of it in a private placement. There is a $40bn programme to sell shares steadily into the open market, which begins this quarter. On top of that, the company has taken on more than $55bn of fresh debt since November.
Sundar Pichai told investors the plan is to fund the build in a balanced way, using operating cash, debt and equity together. That is a reasonable description. It is also a description of a utility, not of the company that spent two decades buying back its own shares.
Alphabet is now a frequent issuer. Investors who owned it as a cash-return story should notice they own something else.
The demand looks real
The obvious question is whether any of this pays back, and the most persuasive answer in the results is the Cloud backlog. It rose by more than $50bn in a single quarter to $514bn. That is contracted revenue Google has signed but not yet delivered, and customers do not sign multi-year compute commitments on a hunch.
Cloud revenue itself grew 82% to $24.8bn, with the segment’s operating margin more than tripling to 35.6%. Pichai says demand is running ahead of what Google can supply, and that AI Mode has passed a billion monthly users. When the company committed to $185bn of capex in February, the sceptical case was that the spending had no matching demand. That case is weaker now.
The warnings are smaller but real. Underlying earnings per share came in at $2.85 against expectations of $2.89. Network advertising fell 1%. Other Bets lost $1.8bn on revenue of $382m. Management flagged some margin pressure ahead from renting third-party capacity as a stopgap. Shares slipped after hours.
Europe watches, again
The European position in all this is uncomfortable and familiar. The EU hosts roughly 5% of global AI compute against about 75% in the United States, and only about one in five European data centres can handle the power density modern chips demand.
Some of the build does land here. SoftBank is putting €75bn into data centres in northern France. But the ownership sits elsewhere, and so does the profit. What Europe reliably receives is the electricity bill: grid upgrades built for hyperscaler load get recovered through retail tariffs, and households end up as unwilling co-investors in someone else’s infrastructure.
The verdict
Alphabet is making a defensible bet. The backlog is real, the Cloud margin is expanding, and a company earning $40bn a quarter in operating income can afford to spend ahead of demand for a while.
But be clear about what has changed. Google has converted itself from the most cash-generative business in corporate history into a capital-intensive infrastructure company that funds itself in the markets and has told shareholders capex will rise again in 2027 without naming a payback date. That is a different asset. Buffett has decided he likes it. Anyone still holding the old story should at least admit they are now holding the new one.
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