Alphabet, the parent company of Google, released its second-quarter fiscal financial report this Wednesday (22), presenting revenues that exceeded market expectations. Furthermore, the company announced profits of US$ 99 billion (equivalent to BRL 501.5 billion) generated from its equity stakes in other companies, such as Anthropic and SpaceX.
During the second quarter, Alphabet achieved total revenue of US$ 119.8 billion (BRL 606.8 billion), surpassing the forecast by analysts consulted by LSEG, who had estimated US$ 116.9 billion (BRL 592.3 billion). The company also reported an earnings per share of US$ 9.11 (BRL 46.15). However, there was uncertainty regarding the comparability of this result with the estimate compiled by LSEG of US$ 2.89 (BRL 14.64) per share, due to possible variations in the calculation methodology used.
This announcement comes at a time when investors are closely monitoring the high investments made by large technology corporations to expand their infrastructure focused on Artificial Intelligence (AI). In recent months, these companies have allocated billions of dollars to building new data centers to meet the growing need for computing power, which in turn has begun to raise questions about the long-term sustainability of this demand.
According to consensus estimates from FactSet, Alphabet plans to invest approximately US$ 187.1 billion (BRL 947.8 billion) in capital expenditures throughout the current year.
The company's progress in AI remains a point of great interest for investors, especially after news that Google postponed the launch of its main AI model. However, on Tuesday (21), the company announced the launch of three new Gemini models with reduced costs. One of these models was specifically developed for cybersecurity, aiming to combat the challenges posed by the advancement of highly advanced AI systems, such as Anthropic's Mythos.
The company's Chief Financial Officer, Anat Ashkenazi, detailed the allocation of the US$ 44.9 billion (BRL 227.4 billion) invested by the company during a conference call with analysts. The majority of this amount was directed towards expanding the essential infrastructure for the development of AI technologies. According to Ashkenazi, the main focus of these investments was the technical infrastructure supporting the company's AI initiatives. She specified that about 60% of the resources were used for purchasing and expanding servers, while the remaining 40% was directed to data centers and network equipment, highlighting Google's priority in increasing computational capacity to support its AI models.
Artificial intelligence is beginning to generate financial results for tech giants; however, the accelerated increase in investments is exerting strong pressure on the financial health of these corporations.
According to Reuters, the financial market awaits the next earnings reports to verify whether the increase in revenue will be able to keep pace with the high costs of technological infrastructure. The so-called hyperscalers—which include Microsoft, Alphabet, Amazon, Meta, and Oracle—continue to significantly increase their investments in AI.
Projections indicate that by 2027, spending growth is expected to surpass free cash flow generation. A survey conducted by Reuters, using estimates from LSEG, points out that these companies are expected to increase their annual operating cash flow by US$ 340 billion (equivalent to approximately R$ 1.72 trillion) between 2025 and 2027. Conversely, planned investments for the same period are expected to grow by about US$ 534 billion (approximately R$ 2.71 trillion), representing an investment of US$ 1.57 for every US$ 1 generated in cash.
Although cost challenges are evident, signs of positive returns have already emerged. Microsoft reported that its AI division achieved annual revenue exceeding US$ 37 billion (about R$ 187.6 billion). Amazon's AWS demonstrated 28% growth during the first quarter.
Shay Boloor, Chief Market Strategist at Futurum Equities, commented that investors are minimizing the transformative impact of AI on the business model of Big Tech. He emphasized that sectors such as software, advertising, and cloud computing have increasingly become dependent on large investments in physical infrastructure. This movement includes building new data centers, acquiring servers and network equipment, expanding cloud infrastructure, and increasing demand for artificial intelligence solutions.
Regarding Microsoft, the company recorded US$ 35.8 billion (about R$ 181.5 billion) in operating cash flow in the second fiscal quarter, while its investment expenditures totaled US$ 37.5 billion (approximately R$ 190.1 billion). There is a concern that the increase in profits may not be sufficient to justify the investments if capital expenditures are draining cash, given that the primary goal of the companies is to generate profit.
David Russell, Global Head of Market Strategy at TradeStation, commented to Reuters on the scenario. Among the five analyzed companies, Oracle generates the most apprehension. Its shares have fallen by 36% over the year, its free cash flow showed a negative result, and the company plans to raise between US$ 45 billion and US$ 50 billion (equivalent to R$ 228.2 billion to R$ 253.5 billion) to expand its cloud infrastructure. Upcoming financial statements will be crucial in determining whether AI progress can keep pace with this level of expenditure.
