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Google’s Flashy New Model Gets Outshone By Its Financial Troubles

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Google’s Flashy New Model Gets Outshone By Its Financial Troubles

Google’s free cash flow continued tanking in its third quarter of the year.

The tech giant had reported its first negative free cash flow figure as a public company back in July in its second quarter earnings, when it came in at negative $5.9 billion. On Wednesday, Google reported that number had dropped even lower to negative $9.07 billion. The quarterly revenue of $127.58 billion also missed market expectations, and the tech giant reported that its long-term debt was up to $125.1 billion. The company also shared that it had made future purchase commitments of roughly $1 trillion.

Meanwhile, executives shared that they are planning to spend significantly more money in the next fiscal year than they did this year. Google is expecting to have spent somewhere between $195 billion and $205 billion this fiscal year. The vast majority of that money is going towards AI infrastructure, Google’s chief financial officer Anat Ashkenazi said on the earnings call, and the capex investments, in turn, drove the free cash flow drop.

Google executives tried to convince analysts on the earnings call that the return on that hefty AI investment would be huge. AI is already driving the highest Search query growth in half a decade, CFO Ashkenazi said, and there is sizable interest in demand for its AI-related subscription plans.

“We expect to generate an attractive ROIC [return on invested capital] that remains meaningfully above our cost of capital, and anticipate generating strong cash flow from operations,” Ashkenazi said, promising fruits of that labor in the long term before bracing investors for continued troubles in the short term.


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