Alphabet, Google’s parent, said on Tuesday that revenue rose 24 percent in the second quarter, lifted by strong performance in its cloud business.

But free cash flow turned negative as it continued to increase investment in AI data centres. That means spending driven by AI investment exceeded the money it brought in.

A report said Alphabet’s second-quarter revenue was $119.8 billion, beating market expectations. Cloud business revenue was $24.8 billion and search revenue was $63.3 billion. Net profit was $112.1 billion, also above expectations. Alphabet shares were little changed in after-hours trading.

Google has in recent months tried to narrow the gap with OpenAI and Anthropic in the AI race. Gemini 3, released last November, was competitive with top models from OpenAI and Anthropic, but has since appeared to lag in performance. Google last month announced an $85 billion equity raise to fund data centre expansion. Google’s capital expenditure this year is expected to reach as much as $190 billion, with most of it allocated to AI.

Google on Monday unveiled three low-cost Gemini models: “3.6 Flash”, “3.5 Flash Lite” and the cybersecurity-focused “3.5 Flash Cyber”. The announcement did not include 3.5 Pro.

The Wall Street Journal (WSJ) said analysts ahead of the earnings release focused on how the spread of consumer AI could affect web search, the core of Google’s advertising business. Google last year introduced “AI Mode”, which responds like a chatbot instead of showing links, and in 2024 introduced “AI Overview”, which summarises search results. Google said in May that monthly users of AI Overview exceeded 2.5 billion.

The WSJ said analysts are raising questions about whether Google’s AI answers can be as profitable as search and whether it can stop other chatbots from encroaching on the search market. It added that if AI answers are integrated into search, website clicks could fall, prompting some companies to review their advertising relationship with Google.