As Alphabet burns through cash on AI, it's turning back to the bond market

By Christine Ji

Alphabet is utilizing its balance sheet with a fresh debt issuance as heavy AI investments eat into its free cash flow

Alphabet recently raised its full-year 2026 capital-expenditure target to as much as $205 billion in support of its growing AI infrastructure demands.

The artificial-intelligence spending spree shows no sign of letting up as Alphabet prepares to raise tens of billions of dollars through an investment-grade bond offering.

On Thursday, Alphabet (GOOGL) (GOOG) filed a preliminary prospectus supplement indicating plans to issue notes across 10 tranches. According to a Thursday Bloomberg report, the deal has drawn over four times the anticipated demand of up to $25 billion.

Alphabet did not immediately respond to a MarketWatch request for comment.

It's Alphabet's third major capital raise this year, following a $32 billion February global debt raise that featured a rare 100-year-maturity note. The company also conducted an $85 billion equity raise in June. Alphabet and hyperscalers like Meta Platforms (META), Amazon.com (AMZN) and Oracle (ORCL) have raised nearly $300 billion in capital since the beginning of 2026, according to a Bank of America note from earlier this week. The newly public SpaceX (SPCX) also issued $25 billion in debt in June.

Shares of Alphabet are down 1.4% on Thursday afternoon.

Alphabet's spending levels have steadily risen as the company invests in AI initiatives that range from its custom chips to workspace applications.

In July, Alphabet said on its second-quarter earnings call that it would now make up to $205 billion in capital expenditures in 2026, up from a previous forecast of $190 billion. The company indicated that compute shortages would require it to seek third-party capacity to meet demand in the near-term. Additionally, Alphabet is continuing to spend aggressively on AI infrastructure and talent.

The heavy spending has taken a toll on Alphabet, as the company's free-cash-flow levels turned negative in the second quarter - a first in Alphabet's public history.

At the same time, investors have been increasingly questioning the return on investment of Alphabet's AI endeavors, especially amid delays and high-profile departures from the company's DeepMind lab. On Wednesday, longtime Google executive Jeff Dean said he was departing the company to pursue his own startup.

DeepMind founder Demis Hassabis also stepped down from his CEO role at the AI lab, though he's staying with the company and has moved into a more research-focused role as Google's chief scientist.

The leadership changes come after Google delayed the launch of its flagship Gemini 3.5 Pro model. Originally slated for a June release, the model reportedly fell short of internal benchmarks and has yet to be released.

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-Christine Ji

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08-06-26 1914ET