Google's parent company Alphabet has reported negative free cash flow for the first time in at least a decade, as spending on artificial intelligence infrastructure pushes well beyond what the business generates after covering its operating costs. The company recorded a free cash flow deficit of $5.9 billion in the second quarter of 2025, even as quarterly revenue climbed 23% year-on-year to $119.8 billion — a sign that robust growth alone is no longer sufficient to absorb the scale of investment the AI race demands.
Alphabet spent $45 billion in capital expenditure during the quarter, with 60% directed at servers and the remaining 40% at data centres. Full-year AI infrastructure spending is now expected to reach up to $205 billion, up from an earlier projection of $190 billion. Chief Financial Officer Anat Ashkanazi told analysts that the negative cash flow position was driven almost entirely by AI-related capital expenditure, and said demand for AI capacity continues to outpace investment. CEO Sundar Pichai described the current moment as "early innings" in a broader technological shift, framing the spending as disciplined and the potential returns as "extraordinary". Despite the upbeat language, Alphabet's stock fell 4% in after-hours trading. Tesla, the electric vehicle company led by Elon Musk, also reported negative free cash flow of $1.1 billion for the same period — its first such deficit in two years — as it scales up its own capital spending cycle.
The financial pressure on Alphabet reflects a deeper strategic gamble playing out across Silicon Valley: that the cost of building AI infrastructure today will be justified by the dominance it secures tomorrow. But Google's AI push is already reshaping markets far beyond its own balance sheet. The company's AI Overviews feature — which generates summarised answers directly within search results, powered by its Gemini AI model — has been expanding internationally and launched in France on 22 July. The tool allows users to get answers without clicking through to source websites, a shift with serious consequences for the global news industry.
Data from German SEO firm Sistrix, which analysed more than 100 million keywords, found that online media traffic in Germany fell by 7.37% following the feature's rollout there. A study by the Reuters Institute and the University of Oxford projects that organic search traffic to news sites could fall by more than 40% over the next three years. The phenomenon has been dubbed "Google zero" — a scenario in which the search engine becomes users' final destination rather than a gateway to the wider web. Reporters Without Borders has warned that French media face similar risks, cautioning that a sharp drop in site visits could further destabilise an already economically fragile media ecosystem. Google disputes the severity of the impact, arguing that the volume of organic clicks to websites has remained broadly stable year-on-year and that the quality of traffic it sends has actually improved.
The twin pressures — unsustainable near-term cash consumption and the disruption of the advertising-funded media model — illustrate the double-edged nature of Google's AI transformation. The company is betting enormous sums on a technology that, even as it drives its own revenues higher, is quietly eroding one of the foundational ecosystems the open web depends on.