Alphabet paid a US$5.2 billion EU fine, and it built up US$3.2 billion of chip systems it will sell to customers later. Even after adding both back, free cash flow is still slightly negative. Over the last 12 months it was US$19.7 billion, against US$73.3 billion for 2025.,the spending is not slowing. Alphabet expects US$195 billion to US$205 billion of capex this year, and says 2027 will “increase significantly” from there.
That spending comes back as a cost later. About 65% of it went into servers and networking, which Alphabet writes off over six years. Depreciation was US$8.4 billion this quarter, up from US$5.6 billion a year ago. The chief financial officer said it will “continue to weigh on the P&L”. In plain words, today’s capex is tomorrow’s expense, and most of it has not started showing up in profit yet.
Alphabet has bought back no shares this year. In the same quarter last year it bought back US$11.5 billion. Instead it has raised money. This year it took on US$85.2 billion of new debt and sold US$42.9 billion of new shares, plus US$19.1 billion of preferred shares that must turn into ordinary shares by 2029. Long-term debt went from US$46.5 billion at the end of 2025 to US$125.1 billion at the end of September. The share count is rising after nine years of falling.
The money is not being wasted, though. Google Cloud’s revenue more than doubled and its operating margin rose to 36.2%. Cloud customers have signed up for US$561 billion of future business, about 55% of it due within two years. But most of that payoff is still to come. Investors are balking at the costs Alphabet is racking up today. And the debt it raises and the new shares it issues are costs borne by shareholders.
Finally,If the spending keeps rising while each search earns less, the gap has to be filled by lenders and new shareholders. This year, that is already what is happening. Think of a landlord who always paid for new flats out of the rent. Now the rent is growing more slowly, the next block costs three times as much, and he is borrowing from the bank and selling stakes to partners to finish it.
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