In partnership with
Cut Lead Review From Hours To Minutes
Sign up for a free trial of Attio, the agentic CRM.
Ask Attio to build a daily workflow that surfaces the deals that need your attention today, like anything with a stage change, a recent reply, or a new signal in the last 24 hours.
Review your pipeline in Claude, synced live from Attio via MCP.
That's it.
THE HEADLINE
The stock is losing roughly 10 points after the announcement,
Makes me think of the saying “the first move is always wrong”, but we’ll have to see whether a recovery is warranted here.
Let’s get right to it:
Revenue grew by 24% centered around Google Cloud’s 82% jump and $514 backlog
Token spend per minute went up to ~22 billion from ~19 billion last quarter
EPS jumped by 294% in another massively unexpected move
And the most important one…
Capex reached $44.9 billion on the quarter, 100% higher than last year
Capex growth was roughly 26% on the quarter
Now something important to keep in mind.
For the first time, free cash flow has gone negative as was to be expected by all of the hyperscalers spending massive amounts on the AI capex wave:
Negative for the quarter, and down 20% compared to last year.
This is exactly where real investors tend to get worried, as free cash flow is really the root of all shareholder returns from a mega-cap company like Google.
We’re already seeing the negative effects of these choices as buybacks have been halted and replaced with $49.6 billion of equity issuance.
Yes, they are diluting you in order to keep spending more on uncertain AI capex projects.
The other problem is a bit more nuanced:
Free cash flow was negative
Cash from operations was $39 billion
Net income was $112 billion
There’s a $73 billion gap between cash flow and net income that needs to be explained.
Whenever these gaps occur - and widen as they are - it always leads to declining earnings quality and future returns for the stock.
In some cases, it even leads to an eventual adjustment of these earnings much lower.
There’s one item in the income statement that explains this gap, and when you find out where it’s coming from…
You’ll begin to realize that we are - in fact - not in a valuation bubble,
But rather in an earnings bubble.
(Don’t forget to download your free research package I put together below.)
Here’s where that $73 billion sits, and how it could bite the stock in the future.
Subscribe to our premium content to read the rest.
Become a paying subscriber to get access to this post and other subscriber-only content.
Upgrade