Alphabet’s Cloud Business Grows, but AI Spending Weighs on Cash Flow

Alphabet’s Google is pursuing an ambitious data-center expansion to establish Google Cloud as a leading provider of artificial intelligence infrastructure.

Alphabet’s rapid investment in data centers and AI infrastructure is driving Google Cloud growth while putting pressure on the company’s free cash flow. [Photo: Google Facebook]

Although the cloud business delivered strong growth, the investment required to support it is putting pressure on the company’s finances, Barron’s Daily reported.

Alphabet reported negative free cash flow of $9.1 billion in the third quarter, marking its second consecutive quarter in negative territory. Capital expenditures reached $51.4 billion as the company continued investing heavily in AI infrastructure.

Google Cloud revenue more than doubled year over year to $30.7 billion, exceeding analysts’ expectations.

However, weaker results elsewhere, including a shortfall in Google Services operating income, contributed to investor concerns about the company’s ability to translate its AI investments into stronger financial returns.

Microsoft also reported higher capital spending as it expanded its AI infrastructure.

The company spent $45.2 billion on capital expenditures during the quarter, up from $34.9 billion a year earlier, although the amount was below market expectations.

The Federal Reserve left interest rates unchanged on Wednesday, maintaining its benchmark rate at 3.75% to 4%.

Chairman Kevin Warsh also announced changes to the central bank’s meeting schedule. Beginning in 2027, one of the Fed’s eight regularly scheduled meetings will be devoted to broader monetary policy strategy rather than a rate decision.

In 2028, two meetings are expected to focus on strategy, leaving six for regular policy decisions.