Good morning, investors. Big Tech earnings are officially underway and Alphabet stepped up to the plate first and made history in the process.
Let’s dive in.
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Cash to burn
Alphabet reported blowout earnings while revealing that it burned cash in the quarter for the first time on record.
The most dependable cash machine in corporate history now spends more on AI infrastructure than what it generates across its entire business, according to Alphabet’s latest earnings release.
The Google parent reported -$5.9 billion in free cash flow for the quarter, down from $10.1 billion the quarter prior and $24.5 billion three quarters ago.
Unsurprisingly, capital expenditures doubled year-over-year to $44.9 billion as AI infrastructure investments ramped up.
Alphabet appears to be financing itself like a utility.
Raised $49.6 billion in stock in June
Sold $20.3 billion of senior notes
Doubled long-term debt to almost $100 billion in six months
To be fair, the headline numbers remain spectacular and I personally continue to hold shares of Alphabet in my portfolio.
The company reported $112.1 billion in net income for the quarter. That’s the largest quarterly profit ever, and about $77 billion of it came from unrealized gains on equity stakes in Anthropic and SpaceX.
The underlying business, too, continues to smash records on all fronts.
Revenue rose 24% to $119.8 billion
Google Cloud grew 82% to $24.8 billion
Cloud operating income tripled to $8.8 billion
Search hit $63.3 billion, slightly below estimates
The stock traded flat immediately after the earnings release, which could be a sign that Wall Street is willing to swallow the negative free cash flow so long as the rest of the business keeps humming.
That said, one thing I will be watching as a shareholder is just how much stock and debt Alphabet will keep issuing to fund its ambitious spending plans.
Market snapshot
Elsewhere
🚗 Tesla missed on earnings. The weaker-than-expected numbers included negative free cash flow while still beating on revenue. The stock has fallen 17% year-to-date. (CNBC)
🤝 President Trump approved a nuclear deal with Saudi Arabia. The agreement could mean huge profits for US companies as well as raise concerns about nuclear proliferation in the Middle East. (WSJ)
📉 Taiwan Semiconductor’s margins are feeling the US push for American-made chips. Pressure from President Trump to shift manufacturing from overseas to domestic is increasing costs and squeezing margins for the world’s leading chipmaker. (CNBC)
Rapid-fire
IBM cut its full-year forecast and missed earnings estimates (CNBC)
AMD and Anthropic signed a deal covering tens of billions in chips and investments (WSJ)
Samsung is raising prices with its new foldable phones hitting the market (CNBC)
SpaceX stock has performed worse than 90% of other IPOs with $1 billion or more market caps since 2009 (Barron’s)
AT&T stock rallied after beating estimates on wireless subscribers (Reuters)
Semiconductor companies are betting their hyperscaler customers never economize (Opening Bell Daily)
President Trump sees 100% tariff on generic drugs starting August 2028 (Bloomberg)
Full Signal
Sylvia Jablonski is the chief investment officer for Defiance. She joined me on Full Signal to discuss her favorite sectors and themes within the AI trade, how leverage fits into a portfolio, investing in quantum and photonics, and more.
Tune in on Spotify, Apple Podcasts, or YouTube.
On this day
🗓 July 23, 1914: Austria-Hungary sent Serbia the ultimatum that pushed Europe into World War I. The news forced the New York Stock Exchange to close for more than four months, the longest shutdown in history.
Last thing
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