FirstFT: Google burned through cash last quarter amid AI infrastructure splurge

Good morning and welcome to FirstFT. In today’s newsletter:

Google’s AI infrastructure splurge

OpenAI admits agent hacked into start-up by itself

The ‘litany of failures’ behind Hong Kong’s Tai Po fire

India’s Gen Z takes on Modi

Google’s AI infrastructure splurge

OpenAI admits agent hacked into start-up by itself

The ‘litany of failures’ behind Hong Kong’s Tai Po fire

India’s Gen Z takes on Modi

We begin with Google, which burned through cash in the second quarter for the first time since going public decades ago amid a splurge on AI infrastructure.

What to know: Google’s gargantuan AI spending has rapidly transformed the group from an asset-light business into a capital-intensive one. The company said free cash flow for the three-month period to end June turned to -$5.9bn, much more than analysts had expected, as it increased its spending plans for data centres and other AI hardware for the second time this year.

Chief financial officer Anat Ashkenazi said capital expenditures in 2026 would be $195bn-$205bn, up from previous guidance of $180bn-$190bn. The stock dipped nearly 3 per cent in after-hours trading.

Google said AI spending was driving accelerating revenues at its cloud unit, which reported 82 per cent growth from a year earlier to $24.8bn in the period. Its core search advertising business grew 17 per cent on year to $63.3bn, slightly below expectations.

The two business lines helped power total revenue to $120bn, from $96.4bn a year ago, beating the analysts’ average estimates of $117bn, Google’s parent company Alphabet said on Wednesday.

‘Full-stack’ strategy: Sundar Pichai, Google’s chief executive, told investors that the second quarter “was an amazing quarter” and praised the company’s “differentiated, full-stack approach to AI”.

Google has gained ground in the AI race thanks to a “full-stack” strategy that combines its own chips, data centres, frontier models and consumer products. It is under pressure to release its latest flagship model, as OpenAI, Anthropic and competitors in China announce technical advances. Read the full story.

More results: Tesla’s profits dropped unexpectedly in the second quarter as Elon Musk’s group offered discounts to boost electric-vehicle sales and revenue from sales of regulatory credits to rivals dried up.

More results: Tesla’s profits dropped unexpectedly in the second quarter as Elon Musk’s group offered discounts to boost electric-vehicle sales and revenue from sales of regulatory credits to rivals dried up.

Here’s what else we’re keeping tabs on today:

Economic data: Singapore reports June inflation data and Australia releases employment figures for the month. South Korea publishes advance second-quarter GDP.

Economic data: Singapore reports June inflation data and Australia releases employment figures for the month. South Korea publishes advance second-quarter GDP.

Five more top stories

1. OpenAI has admitted that an “agent” hacked into the start-up Hugging Face by itself, in one of the first public examples of a cyber attack by an AI system acting outside human control. The ChatGPT maker said yesterday the agent escaped a testing environment, gained internet access and stole login credentials.

More AI news: Samsung is in talks to invest hundreds of millions of euros in the AI start-up Mistral, a move that would bolster the French company’s efforts to become a leading alternative to US technology groups.

More AI news: Samsung is in talks to invest hundreds of millions of euros in the AI start-up Mistral, a move that would bolster the French company’s efforts to become a leading alternative to US technology groups.

2. Mercedes-Benz risks being barred from selling cars in the US under legislation that will be voted on in a powerful US Senate committee on Wednesday, underscoring the rising scrutiny of China-backed groups. Mercedes, a German automaker that is 20 per cent owned by Chinese groups, has been lobbying the Senate commerce committee to dilute the Connected Vehicle Security Act.

Nike’s China sales overhaul: The US sportswear brand will cut various online distribution channels in China as it tries to overhaul digital sales in a market that has posed a huge challenge.

Nike’s China sales overhaul: The US sportswear brand will cut various online distribution channels in China as it tries to overhaul digital sales in a market that has posed a huge challenge.

3. After months of public hearings into the worst tragedy in Hong Kong for decades, a sprawling 627-page closing argument has pointed to a “litany of failures” linked to the Tai Po blaze that killed 168 people last year. Lawyers investigating the fire blamed “unscrupulous” contractors responsible for renovations and “systemic” issues with regulation.

4. Japan’s finance minister warned markets that authorities stood ready to take “appropriate and bold action” as the latest flare-up in the Iran war pushed the yen under ¥163 to the dollar for the first time in almost 40 years. Traders said Satsuki Katayama’s warning had little impact on the dollar-yen exchange rate.

More Japan news: Big international investors fear big Japanese bond bets could become the modern version of the infamous “widow-maker” trade.

More Japan news: Big international investors fear big Japanese bond bets could become the modern version of the infamous “widow-maker” trade.

5. Pakistan has requested a $10bn facility from Washington to shore up its foreign exchange reserves, as the cash-strapped country of 250mn people seeks to capitalise on its role mediating between the US and Iran. The support package pitched by Pakistan, which was first reported by Reuters, would involve a five-year repayment period.

Middle East war: Donald Trump has threatened to destroy an Iranian bridge or power plant every time Iran’s forces target a ship in the Strait of Hormuz.

Middle East war: Donald Trump has threatened to destroy an Iranian bridge or power plant every time Iran’s forces target a ship in the Strait of Hormuz.

India’s Gen Z takes on Modi

Protesters hold placards calling for the resignation of Prime Minister Narendra Modi © Photo by Ritesh Shukla/Getty Images

Analysts said the unexpected size of Monday’s student protests in Delhi, with tens of thousands on the streets and the backlash generated by the police crackdown, posed a growing political risk to Prime Minister Narendra Modi and his Hindu nationalist Bharatiya Janata Party.

A hitherto popular leader fresh from a string of election victories, Modi is now faced with an unexpectedly strong youth protest movement which has emerged from his middle-class voter base. This raises the question of whether India will see a repeat of the Gen Z protests which challenged governments in neighbouring Bangladesh and Nepal.

We’re also reading...

Neo-mercantilist era: In terms of economic size, self-sufficiency and monopoly power, China is edging out the US and the EU. Martin Wolf looks at what this means for the rest of the world.

Japan’s trains: A planned high-speed maglev train that will travel at 505km per hour has taken on symbolic importance, writes Leo Lewis.

Cold noodles: The Japanese company that gave the world the Cup Noodle has launched a variant that does not need boiling water.

Venezuela’s oil money: Washington has given diverging accounts of where the earthquake-shattered country’s funds are going.

Neo-mercantilist era: In terms of economic size, self-sufficiency and monopoly power, China is edging out the US and the EU. Martin Wolf looks at what this means for the rest of the world.

Japan’s trains: A planned high-speed maglev train that will travel at 505km per hour has taken on symbolic importance, writes Leo Lewis.

Cold noodles: The Japanese company that gave the world the Cup Noodle has launched a variant that does not need boiling water.

Venezuela’s oil money: Washington has given diverging accounts of where the earthquake-shattered country’s funds are going.

Chart of the day…