Alphabet’s (GOOGL) stock is down 5% after the technology giant raised its expected spending on artificial intelligence (A.I.) this year to as much as $205 billion U.S.
The increased spending on A.I. infrastructure and products was announced alongside blowout financial results for this year’s second quarter.
The Google-parent company reported earnings per share (EPS) of $9.11 U.S., well ahead of Wall Street’s consensus forecast of $2.88 U.S. The profit was up 294% from a year earlier.
Revenue for the quarter totaled $119.8 billion U.S., topping analyst estimates of $117.1 billion U.S. Sales were up 24% year-over-year.
Revenue from the Google Cloud unit rose 82% from the previous year to $24.8 billion U.S. Wall Street had expected 63% growth.
Analysts were watching the cloud segment for signs that Alphabet’s customers are spending on its A.I. services.
Advertising revenue from the Google search engine increased to $81.6 billion U.S., compared to analyst estimates of $81.3 billion U.S.
However, search revenue of $63.3 billion U.S. was just short of the consensus estimate among analysts of $63.4 billion U.S.
Unfortunately, the strong quarter was overshadowed by Alphabet’s capital expenditures.
The company said that its capex for the second quarter totaled $44.9 billion U.S., a 101% increase from the same period last year. Wall Street expected Q2 capex of $45 billion U.S.
Additionally, Alphabet reported negative free cash flow for the quarter of $5.9 billion U.S. due to its capex, which went almost entirely to A.I.
During their earnings call, management at Alphabet said that they now expect to spend between $195 billion U.S. to $205 billion U.S. in capital expenditures this year.
That’s up from previous guidance of $180 billion U.S. to $190 billion U.S. The new capex figure has GOOGL stock trending lower.
Management said that the increased spending is due largely to rising costs for the hardware needed to power A.I. models and applications.
Prior to today (July 23), GOOGL stock had risen 9% this year to trade at $342.09 U.S. per share.
Tech Insider
