AI is forcing Big Tech to do something it’s never done: Spend more than it earns, and Wall Street hates it

Alphabet made history in two ways on Wednesday.

First, it had its most-profitable quarter in corporate history. Reporting $112 billion in profit, that’s its first 12-figured quarterly profit in history. But 69% of that came from unrealized paper gains on its stakes in SpaceX and Anthropic, not the core business, and Wall Street looked straight through it. 

Stripping that out, however, Google still ostensibly had an excellent quarter; its cloud computing business, now the core of the company, soared 82%. So why did investors punish Alphabet today, sending their shares down nearly 7%, the worst day since tariffs?

Because of the other record it set: for the first time in the company’s history, it became cash flow negative, meaning less cash entered the company than left it last quarter. Management also warned that 2027 capital expenditures would be “significantly” higher, further deepening anxiety on the Street. The company’s latest filing Thursday shows more than $800 billion in purchase commitments and other obligations, an eye-popping number that reveals some sneakier expenses like some $51 billion spent backstopping other companies’ data centers.

At least six firms cut their price targets for Alphabet in response, including Piper San...