As fears of a bursting AI bubble reach new heights, Google has emerged as arguably one of the best yard sticks available to measure investor sentiment around AI.

Google’s parent company, Alphabet, released its quarterly earnings report on Wednesday. On the surface, there were plenty of reasons to pop the champagne: as the New York Times reported, the company’s profits rose to a staggering $112 billion, four times higher than the nearly $25 billion in profit over the same period last year.

Yet underlying that banner profit is a familiar beast: the same circular financial motions that gave rise to the AI bubble narrative in the first place.

As the NYT observes, the vast majority of Google’s windfall — $99 billion, to be exact — wasn’t due to actual revenue from AI or any other services the company offers; instead, it was due to Alphabet’s mammoth investments in other tech companies. In particular, Alphabet attributed the massive profits to investments in corporations also chasing the AI payday, like Elon Musk’s SpaceX, as well as Anthropic, the company behind the popular chatbot Claude.

In other words, it’s great financial news — until the instant the AI market crashes, in which case it would all come crashing down. (In an earnings statement, Alphabet CEO Sundar Pichai enthused that Google’s “AI investments are redefining what’s possible across every part of our business.”)

Under that green surface froth is a churning sea of red. In addition to those starry revenue numbers, Google upped its anticipated 2026 capital expenditures from $180 to $190 billion — already staggering numbers — to an eye-watering $195 to $205 billion. The argument, in a nutshell, is that it needs to spend much more to break out of the computing bottleneck, which will unlock even higher profits next year.

As Gizmodo observed, Alphabet’s chief financial officer Anat Ashkenazi told investors to expect that figure to “increase significantly in 2027.”

At the same time, Alphabet posted a negative free cash flow for the first time as a publicly traded company, meaning the actual cash it generated after covering operating expenses and capital expenditures is worse than nil.

That revised forecast, coupled with the bone-dry cash flow, left investors shellshocked. On Thursday, the day after the company’s earnings report hit newsrooms, Alphabet’s stock fell by 6.89 percent — evidence, perhaps, that massive profits on paper are no longer enough to keep investors hooked at this stage of the AI bubble.

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