Google burning through cash with spiralling AI costs
Summary
Google's parent company, Alphabet, spent a large amount of money on building AI technology, leading to a negative free cash flow of $5.9 billion for the first time in over ten years. Despite this, Alphabet's revenue grew by 23% compared to last year, but the high cost of AI investments caused its stock to fall.Key Facts
- Alphabet's free cash flow was negative $5.9 billion, the first time in a decade.
- The company expects to spend up to $205 billion on AI this year, up from $190 billion.
- Quarterly revenue reached $119.8 billion, a 23% increase over the previous year.
- In Q2 alone, Alphabet spent $45 billion, with 60% on servers and 40% on data centers.
- AI spending accounts for almost all of Alphabet's increased capital expenditures.
- Alphabet’s CFO said investment demand in AI still exceeds their spending capacity.
- CEO Sundar Pichai described AI development as being in the early stages with great future potential.
- Alphabet’s stock dropped 4% in after-hours trading following the announcement.
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