Google just reported the biggest quarterly profit in its history — but roughly two-thirds came from gains on investments rather than its main businesses.
Alphabet, Google’s parent company, reported $112.1 billion in profit for the three months ending in June. That’s nearly four times the $28.2 billion it made a year earlier. About $77.1 billion of that total came from gains on investments that had largely risen in value on paper, but not yet sold for cash.
Must Read
Meanwhile, Google’s costly push into artificial intelligence is straining the cash it has available to spend. Alphabet recorded negative free cash flow of $5.9 billion — its first quarter in the red on that measure since going public — as spending on data centres, chips and other AI infrastructure surged. Free cash flow is the money a company has left after covering its operating costs and capital spending.
Moneywise reached out to Google for comment but did not hear back before publication.
Google’s $200-billion AI bet
Google is not alone in spending heavily on AI. Major technology companies are expected to invest more than $700 billion this year, much of it on the data centres, chips and electricity needed to build and run advanced AI systems.
Alphabet now expects to spend between $195 billion and $205 billion on capital projects in 2026, raising the midpoint of its previous forecast by about $15 billion.
Chief financial officer Anat Ashkenazi said the company is still struggling to build enough capacity to keep up with strong demand from Google Cloud customers and its own businesses.
Alphabet shares fell nearly 7% in Thursday trading as investors reacted to the higher spending forecast. The size of its AI investment becomes clearer when compared with 2024, when the company spent $52.5 billion on capital projects, according to fortune.
Much of the money will go toward the infrastructure Google needs to build and run its AI products. Ashkenazi warned that the investment would continue to put pressure on free cash flow.
“We expect that free cash flow will remain under pressure driven by our investments in technical infrastructure, which enable us to capitalise on the AI opportunity and continue to drive attractive returns,” Ashkenazi told the Financial Times.
Read More: 7 top habits of ‘quietly wealthy’ Americans. How many do you follow?
Companies question the cost of AI
The scale of Google’s AI business is growing quickly. The company said its Gemini product now has 950 million monthly active users, while its systems process 22 billion tokens every minute.
But that level of AI use does not come cheap. Just months ago, many businesses encouraged employees to use AI for nearly everything, a trend known as “tokenmaxxing.” Now, as the bills arrive, some are introducing limits and asking whether all that usage is actually producing enough value.
Accenture has reportedly discouraged employees from using AI for some routine tasks, while Uber has introduced monthly spending limits for certain AI coding tools. The shift shows that companies are becoming more focused on where AI actually saves time or makes money — a question that also hangs over Google’s much larger investment.
“Markets want to see hyperscalers pushing hard to secure AI leadership but not at a pace that eviscerates earnings,” Dec Mullarkey, managing director at SLC Management, told the Financial Times. He said Alphabet appeared to be striking the right balance between investing in AI and protecting its profits.
Signs Google’s AI bet is paying off
There are signs Google’s spending is helping the business grow. Revenue from its search advertising business rose 17% to $63.3 billion, while Google Cloud revenue jumped 82% to $24.8 billion. Together, those businesses helped push Alphabet’s total quarterly revenue to nearly $120 billion.
But that growth is coming at a steep cost. Alphabet spent $44.9 billion on capital projects during the quarter and expects spending to rise again in 2027. CEO Sundar Pichai said Google is already putting computing power toward the development of Gemini 4 as it races to keep up with rivals such as Anthropic and OpenAI.
For investors, the question is whether Google’s AI businesses can grow quickly enough to justify the cost. The company is making more money from cloud and search, but staying near the front of the AI race is becoming far more expensive.
What To Read Next
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
This article originally appeared on Moneywise.com under the title: Google just posted the biggest profit in its history — but two-thirds of it was money it hasn’t actually made yet
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.