Google just posted a $112-billion profit and still ran out of cash

Google parent Alphabet reported a $112.1 billion profit for the second quarter of 2026, yet its business burned $5.9 billion more cash than it generated in the same three months.

The gap between the two numbers reveals how expensive the AI race has become for the world’s most profitable company.

Alphabet’s earnings release shows revenue climbed 24% year on year to $119.8 billion, with Google Cloud accelerating 82% to $24.8 billion on demand for AI infrastructure.

But the company spent $44.9 billion on capital expenditure in the quarter, mostly on data centres and chips, which pushed free cash flow to negative $5.9 billion. A year earlier, the same quarter produced $5.3 billion in positive free cash flow.

Borrowing like a startup

To plug the gap, Alphabet turned to the capital markets on a scale it has never needed before.

The company raised $49.6 billion in June by issuing new shares and mandatory convertible preferred stock, and sold senior unsecured notes for a further $20.3 billion. It also set up a programme to sell up to $40 billion more of its own stock over time, though it had sold no shares under that facility by the end of June.

The company’s long-term debt nearly doubled in six months, from $46.5 billion at the end of December to $98.2 billion by 30 June. Alphabet also stopped buying back its own shares entirely, having spent $13.2 billion on repurchases in the same quarter last year, while it kept paying dividends of $2.7 billion.

The fundraising leaves Alphabet far from short of money. Its cash and marketable securities almost doubled to $242.5 billion over the half year, giving it a war chest for what comes next.

Management signalled exactly what that is: the company raised its 2026 capital expenditure guidance by a further $15 billion to between $195 billion and $205 billion, according to comments on its earnings call.

Most of the profit never even touched a bank account

The $112.1 billion profit figure carries its own disclaimer. A footnote in the release shows a $99 billion gain on equity securities drove net income up 298% and earnings per share up 294% to $9.11.

Those gains came primarily from Alphabet’s minority stakes in AI developer Anthropic and rocket maker SpaceX, Fortune reported, after both companies saw their valuations soar during the quarter.

Accounting rules require Alphabet to mark those private stakes to their latest value every quarter and run the change through its income statement, even though no money changes hands.

The investment gains added $77.1 billion to net income after tax and accounted for $6.26 of the $9.11 in earnings per share. Strip them out and adjusted earnings came in at $2.85 per share, just below the $2.89 analysts expected, CNBC reported.

Ben Barringer, Head of Technology Research at Quilter Cheviot, said the results were a mixed set, with headline numbers that were undeniably impressive but reasons for caution beneath the surface.

He noted the cloud business took its backlog to an extraordinary $514 billion, but said investors appear focused on the cost of sustaining that growth, with the raised capital expenditure guidance underlining just how capital intensive the AI race has become.

Barringer added that comments around equity issuance and the need for ever higher investment raise questions about the long term returns from this spending cycle.

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