Alphabet falls after spending surge sparks concerns over AI returns amid Gemini delay
Shares fall as capex and AI timing weigh on sentiment
Shares of Google parent Alphabet were down 3.6% at $329.63 premarket.
The company reported its best-ever quarter of growth for its cloud computing division, which surged 82% to $24.8 billion, but a significant capex hike weighed on investor sentiment.
Google also posted its first-ever negative free cash flow and a slight miss on adjusted EPS in the second quarter.
"The business model appears to be morphing rapidly from high margin ads to one dominated by Cloud (seemingly headed for ~30%+ of total revenue) where FCF is almost certainly negative in '27," Piper Sandler said.
The company raised its 2026 capex forecast to $195 billion-$205 billion, citing a need for more AI capacity. It previously expected to spend between $180 billion and $190 billion this year.
Google's capex hike comes as delays to Gemini 3.5 Pro heighten concerns over its AI competitiveness amid intensifying pressure from Anthropic and OpenAI.
The average rating of 62 analysts on the stock is "buy" and the median price target is $430.00, according to LSEG data.
As of the last close, Google was up 9.3% year to date.
