Alphabet posts record Q2 revenue, negative free cash flow

Alphabet Inc., the parent company of Google, reported record-breaking revenue for the second quarter of 2026, driven by surging demand for its cloud and artificial intelligence services. However, the company also revealed it spent so heavily on AI infrastructure that it reported negative free cash flow for the first time, a stark illustration of the immense cost of the industry's AI arms race.

For the quarter ending June 30, Alphabet's total revenue climbed 24% year-over-year to $119.8 billion, a new quarterly record. The company's operating income rose 30% to $40.8 billion. The standout performer was Google Cloud, where revenue skyrocketed 82% to $24.8 billion, fueled by enterprise adoption of AI solutions and cloud infrastructure. The cloud division's operating income more than tripled to $8.8 billion.

The company's core advertising businesses also showed strong growth. Revenue from Search and other advertising rose 17% to $63.3 billion, while YouTube advertising revenue increased 13% to $11.1 billion. CEO Sundar Pichai attributed the search growth to the integration of AI features like AI Overviews and AI Mode, which he said are encouraging users to make more complex queries....