If you listen to the economists, one of the good things for the economy is the spending on AI infrastructure that translates into many companies. Big tech alone is expected to spend $700 billion to a $1 trillion dollars on AI this year and next. With all that spending how are the companies doing?

In an article by Deborah Mary Sophia and Kenrick Cai of Reuters, Alphabet reported its earnings for the quarter and they were worth waiting for.

Revenue in Google Cloud rose 82% to $24.8 billion on strong demand from AI hungry enterprises worldwide. Analysts were expecting 64% increase.

Advertising revenue was $81.6 billion compared to estimates of $81.1 billion. Total revenue for the quarter was $119.8 billion beating the estimates of $116.9 billion.

Capital expenditures or capex, Alphabet said they will spend between $195 and $205 billion next year.

Adjusted profit per share was $2.85 slightly below the estimated $2.89. The company reported negative free cash flow for the first time in history, burning $5.9 billion.

Thomas Monteiro, senior analysts at Investing.com noted the market’s most reliable cash generators are now spending more than they bring in. As long as revenue keeps accelerating, investors will tolerate it. But capital has a real cost again, and the room for error is shrinking for every quarter.

Linking to dividend paying stocks, many years ago big tech disrupted the advertising business and had great margins or cash flowed to the companies. Are margins down a bit? the company is still making money and has dominate positions but every quarter tells a story.

There are more questions than answers, till the next time – to raising questions.