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AI Capex Trends – Q2 Google earnings readthrough

Published on July 22, 2026

Dauvin Peterson

Google (GOOGL) reported after the close. As it pertains to AI Infrastructure stocks, I would classify this as positive directionally. For SPCX, the company affirmed the need for third-party compute to support the demand they are seeing – a reasonably clear read through.

Google reiterated the 2027 commentary of capex increasing significantly, reported accelerating customer demand for compute infrastructure (cloud revenues up 83% y/y) and discussed how new models are getting larger, expressing a commitment to continue developing frontier-quality models. This comes at a cost to FCF and margins as Google deals with meeting the pace of customer growth – this is likely to be a healthy debate as to the investor appetite for how far they can press these metrics.

Prior statements reaffirmed for 2027 capex (a significant increase) without additional detail and 2026 capex was raised 8% at the mid-point to $195–205B. The consensus for 2027 is currently $263B (some higher). With 2026 capex more than doubling vs 2025, it would feel pre-earnings 2027 consensus is a floor with a range higher towards $300B as a possibility. The company did not provide clarity on impacts of cost inflation in these numbers.

As it pertains to models, Google is committed to being at the Pareto frontier and focused on training Gemini 4 and releasing Gemini 3.5. While commentary attempted to classify LLMs as an ingredient in a full-stack offering for AI to customers, they clearly indicated the desire to stay at the front with future models that will be much larger.

The cost for this and their expansion is FCF and margins; this was the first quarter I could see that they have printed negative FCF and the commentary indicates a willingness to spend into this cycle heavily – thus more negative FCF to come in future quarters. This has been backstopped by $40B in equity raised for capex purposes. One might interpret that negative FCF will accelerate in 2027. Commentary around the ROIC path was not concrete.

Readthrough for SPCX – while note naming SPCX, they confirmed agreements to rent compute to meet demand: “And given the supply constrained environment, we plan to expand the use of third party capacity in Q3 as a bridging strategy while we build out more internal capacity. This strategy allows us to keep growing our customer base and capture greater overall value. However, it will create modest margin pressure in the near-term as we utilize this capacity.”

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