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Big Tech stays in AI spend mode as cash flows hit strain
Alphabet reported negative free cash flow on $118bn of revenue, and Meta’s free cash was $784m on $61bn as investors pressed for clearer monetization.
Billions of dollars are being poured into artificial intelligence by major technology companies, and new earnings updates from Microsoft, Meta, Google, Apple and Amazon showed they plan to keep spending heavily on AI-related buildouts such as chips, data centres and technical staff, the BBC Business reported.
The BBC Business said Wall Street’s key concern is that tangible payback is not yet showing up in results, with investors reacting sharply as companies seek to justify growing external AI investment. The article pointed to the absence of meaningful revenue directly attributable to chatbots and related tools, despite the high cost of developing them.
According to the report, Alphabet and Meta in particular are spending more on AI tools than they are generating in cash. Alphabet posted negative free cash flow on $118bn of revenue for the first time as a public company, while Meta generated $784m in free cash on $61bn of revenue, and Reality Labs, which covers much of Meta’s AI work, lost nearly $9bn in the first half of this year.
The BBC Business also tied investor skepticism to market reactions, noting Meta’s shares fell to their second lowest level in a year after CEO Mark Zuckerberg said Meta is working on its own AI agent and plans to develop an operation to sell an AI tool directly to other firms, neither of which currently exists, the article said.