Google's parent company, Alphabet, has reported its first negative free cash flow in at least a decade, as spending on artificial intelligence infrastructure outpaces the cash generated by its core business. The firm now expects to spend up to $205bn (£150bn) on AI this year, up from an earlier forecast of $190bn, reflecting the intense race among major technology companies to build out AI capacity. Despite strong underlying growth, investors reacted negatively, sending Alphabet's shares down 4% in after-hours trading.

Free cash flow, the money left after covering operations and investments, came in at negative $5.9bn (£4.3bn), driven almost entirely by capital spending on AI. Chief financial officer Anat Ashkanazi said the company spent $45bn in the second quarter alone, split roughly 60% on servers and 40% on data centres, up from $36bn in the first quarter, while quarterly revenue rose 23% year-on-year to $119.8bn. Both Ashkanazi and chief executive Sundar Pichai defended the scale of investment, arguing that demand for AI still exceeds current capacity and that the company remains "disciplined" in pursuing what it sees as substantial long-term returns.