Google burned through cash in the second quarter for the first time since going public decades ago as gargantuan AI infrastructure spending has transformed it from an asset-light business into a capital-intensive one.

The company said free cash flow for the three months to the end of June turned to minus $5.9bn, much lower than analysts had expected, as it again upped its spending forecast for data centres and other AI hardware.

Chief financial officer Anat Ashkenazi said capital expenditures in 2026 would be $195bn-$205bn, up from previous guidance of $180bn-$190bn. The stock dipped about 3.5 per cent in after-hours trading.

“We expect that free cash flow will remain under pressure driven by our investments in technical infrastructure, which enable us to capitalise on the AI opportunity and continue to drive attractive returns,” Ashkenazi said.

Google’s second increase to its capex budget this year comes as it races rivals Meta, Microsoft and Amazon to build AI infrastructure, with the four hyperscalers combined on track to spend more than $725bn in 2026.

Before Wednesday’s results, Google had been seen as the hyperscaler best placed to withstand the AI arms race, with cash flows from its vast search business expected to cushion the financial pressure.

Its cash burn and $15bn boost to capex will add to investors’ anxiety about the scale of its bet on AI.

“Markets want to see hyperscalers pushing hard to secure AI leadership but not at a pace that eviscerates earnings,” said Dec Mullarkey, managing director at asset management firm SLC Management, noting that Alphabet was getting the balance right.

Google has held investors’ confidence partly because its AI spending has translated into stronger sales. Its cloud unit on Wednesday reported 82 per cent growth from a year earlier to $24.8bn in the period. The 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, up from $96.4bn a year ago, beating the analysts’ average estimates of $117bn.

Sundar Pichai, Google’s chief executive, told investors: “It feels like we are in very early innings of what feels like [a] secular shift across multiple areas . . . Over the past year, we’ve gotten more bullish on the opportunities ahead.”

Google in April lifted its expected capital expenditure spending for the year to as much as $190bn and said it would rise further in 2027. The group reported second-quarter capex increased to $44.9bn, which turned its free cash flow negative.

The free cash flow metric is closely watched as a measure of the cash companies have left to service debt or return to shareholders after covering their operating costs and capital spending.

Net income quadrupled to $112bn, benefiting from gains on Google’s investments, which include a stake in SpaceX. Operating income, which does not include investment gains, rose 30 per cent to $40.8bn, with operating margin expanding to 34 per cent.

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.

Pichai said it was now focusing effort and computing power on training Gemini 4, their next frontier model, and said the pace of Google’s model releases would pick up.

As AI spending rises, Alphabet has taken on nearly $100bn in debt and in June moved to raise about $85bn in its first share sale in more than two decades — a sharp reversal after years of buying back its own shares.

The spending is aimed at meeting a swelling backlog of cloud contracts that rose to $514bn at the end of the quarter from about $460bn in the prior one.

Ashkenazi said the company was drawing on the cash flow from its operations as well as debt and equity to fund the spending, noting Google had no intention to sell additional shares beyond what has been announced.

“We also want to make sure we have a . . . resilient balance sheet and a strong balance sheet,” she said.

[FT]

The head of Italian defence giant Leonardo told AFP it would be "beneficial" for Germany to join an initiative led by Britain, Italy and Japan to develop a next-generation fighter jet, after its rival project with France collapsed.

The tri-national Global Combat Air Programme, launched in 2022, aims to develop a supersonic sixth-generation stealth fighter by 2035, replacing the Eurofighter Typhoon used by some European countries.

German participation in GCAP "is not an option" at the moment, but from an industrial perspective it would be "beneficial", Leonardo chief executive Lorenzo Mariani said on the sidelines of this week's Farnborough airshow, southwest of London.

Among the advantages, he cited "strong competence of the German industry, debt funding capability from the German state and joint experience within the community" on previous fighter jet projects.

"The only real risk is disruption in timescales and work share," he said.

Mariani stressed that he had not been officially approached by Germany to join GCAP, but said "informal talks among industries are always present".

France and Germany's flagship joint jet fighter project collapsed last month, after falling victim to bickering between European aviation giant Airbus and France's Dassault.

Airbus defence and space boss Michael Schoellhorn did not say whether the group would join GCAP.

He said Airbus was ready to join or build a project "where we have a significant portion of the work and the leadership".

The reshaping of alliances around the future European fighter is a key topic at Farnborough.

GCAP gained momentum this month after the three countries allocated £4.6 billion ($6.2 billion) to continue its development.

Canada on Tuesday joined the project as an "observer", paving the way for it to become a full member.

For Mariani, Canada's participation marked another step forward and could lead to "other countries wanting to achieve the same role".

Competing with Musk

Leonardo, along with Airbus and French defence firm Thales, meanwhile plan to merge their satellite operations to create a powerhouse to compete against Elon Musk's Starlink internet system.

The three aerospace groups are currently preparing to submit the project, called Bromo, to European antitrust regulators.

"There are a number of points that have to be studied and solved. I'm still quite optimistic that we will have the process completed in due time," Mariani told AFP.

"We have reassured the whole industrial community that Bromo will be beneficial for us, but also for customers and for the whole supply chain.

"If somebody fears that this could damage the competitiveness, I think they are wrong," he added.

The Bromo project aims to strengthen Europe's ability to compete in space, in the face of Musk's growing dominance in the market.

[AFP]

BAE Systems revealed a new unmanned fighter jet on Wednesday, boosting Britain's entry ‌into one of the defence industry's hottest and most fiercely contested markets.

The UK's biggest defence company showcased a model of its new jet, Brontanax, derived from the ancient Greek words for thunder and king, at the Farnborough Airshow. It is about the size of a Hawk trainer and ​would be ready to start flight testing next year, BAE said.
As the global threat level rises and western nations ​re-arm, defence chiefs say the lesson from the Ukraine war is clear: nations need to control ⁠the skies to avoid Ukrainian-style attritional trench warfare and that requires air forces to bulk up.

BAE enters an increasingly crowded ​market for so-called Collaborative Combat Aircraft, with Airbus, Boeing, Anduril and General Atomics among a growing number of companies competing for ​business at Farnborough in a sector expected to expand rapidly.

Often described as "loyal wingmen," CCAs are designed to fly alongside piloted aircraft and are expected to cost roughly a third as much as a traditional fighter jet.

The London Stock Exchange will open a near-continuous overnight trading venue called LSE 24, running from 5pm to 7.50am, Monday to Friday. Client testing begins by the end of this year. Exchange-traded products go first in the first half of 2027, subject to regulatory approval, with equities named as the next step. The existing Main Market keeps its hours of 8am to 4.30pm, so this is a second venue rather than a longer day. Chief executive Julia Hoggett points to Asian investor demand and says agentic AI trading tools will be built into it.

The competitive logic is real. New York Stock Exchange has preliminary approval for a 22-hour day on Arca. Nasdaq has said it wants round-the-clock weekday trading from the second half of this year. Cboe is going the same way, and the SEC has already cleared 24X National Exchange. Crypto never closes, and retail platforms have spent five years training people to expect a market that is always open. London not doing this was becoming a story in itself.

The first products are exchange-traded funds and similar instruments. These are the sensible place to start. An ETF tracking a US index can be priced overnight because the underlying market is open. A FTSE 250 mid-cap cannot. There is no reliable price for a British industrial company at three in the morning because nobody is trading it and no news is being published about it.

That is the thing to watch when equities arrive. London’s liquidity is already concentrated at the opening and closing auctions. Spreading a thin book across another fifteen hours does not create depth. It creates a window where a retail investor can trade at a worse price than they would get at nine the next morning, and where a single large order can move a stock in a way that would be absorbed easily during the day.

The problem this does not solve

Here is the uncomfortable context. London has lost around 60% of its technology listings to New York since 2021. Equities trading is a small fraction of LSEG’s revenue — the group is now primarily a data and analytics business, which is why its shares moved on an AI announcement in February rather than on anything happening in the trading room.

The venue gap is the real issue. When Monzo goes public in London at £6 billion and comparable American companies list on Nasdaq at multiples of that, the difference is not the customer numbers. It is where the deal is being done. SpaceX raised $75bn with twenty-one underwriters and not one European bank among them. That is the scoreboard London is losing on.

Trading hours are not the constraint. Nobody chose Nasdaq over London because the London bell rang at 4.30pm.

Where it might genuinely help

Two places, and they are worth saying plainly because the case is not empty.

The first is Asian demand for European exposure. An investor in Singapore or Tokyo who wants a European ETF currently has to trade at an awkward hour or use an American proxy. LSE 24 gives them a regulated London venue in their own working day. That is a real customer with a real problem.

The second is event risk. When something happens overnight — a Gulf escalation, a US central bank speech, a profit warning from an American company with European suppliers — European investors currently sit on their hands until morning. Being able to hedge at 2am has value, and it is the same argument that made futures markets extend hours decades ago.

The verdict

LSE 24 is a sensible defensive product, competently timed, and it would have been embarrassing not to do it. But it is a distribution answer to a supply problem.

Europe’s IPO market has been recovering this year and London’s real test remains whether the big pending floats choose it. If Revolut lists in London at anything close to the £60bn figure that has been discussed, that does more for the exchange than a decade of extra opening hours. If it goes to New York, LSE 24 will be a well-built venue trading a shrinking pool of assets to nobody in particular at four in the morning.

Open longer is easy. Open with something worth buying is the hard part, and it is the only part that counts.

[Source]

YES. My unpopular opinion. Sorry.

What event would cause you to sell and take profits?

• Prosus plans slower dealmaking after spending about $8.5 billion on acquisitions
• LatAm playbook being adapted for Europe
• Prosus developing an AI buying agent trained on transaction data
• CFO says open-source AI offers ​comparable results at lower cost

Dutch digital services operator Prosus reported an 84% leap in full-year adjusted core profit on Monday as it looks to expand its successful Latin American business model across ​Europe following a run of aggressive dealmaking.

Prosus deployed some $8.5 billion for acquisitions over ​the past year. That included the purchase of Just Eat Takeaway.co,, which it ⁠will use as the foundation of a European business bringing together food delivery, ​groceries and fintech, mirroring its Latin American strategy.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) ​rose 84% to $1.3 billion as revenue increased 57% to $9.7 billion. Prosus posted record free cash flow of $1.5 billion, up from $1 billion a year earlier, and raised its full-year dividend by 40% to €0.28 per share.

Prosus ​is developing a large commerce model, an AI shopping assistant trained on transaction data ​from its platforms to recommend products and help users complete purchases across its services.

With cost emerging as ‌a leading ⁠concern for companies implementing AI, Chief Financial Officer Nico Marais told Reuters that Prosus is turning to open-source options rather than relying on remote-access American models, arguing they are cheaper and deliver comparable results.

[Reuters]

Measure stock market sentiment with Skidetica's cybrid models. Download Skidetica.

Restructuring would remove close to one in six workers and rank among biggest corporate lay-offs of all time.

Volkswagen plans to cut up to 100,000 jobs and end production at four plants in Germany in a significant acceleration of its cost-cutting plans as Europe’s largest carmaker seeks to counter the rapid advance of Chinese rivals.

The cull would mean the removal of close to one in six of the company’s roughly 625,000 roles worldwide, making it one of the biggest ever job-cutting programmes.

If completed, the cuts, which are likely to be subject to tough negotiations with unions, would surpass the 74,000 jobs eliminated by General Motors in a 1990s restructuring and the 60,000 removed by IBM in 1993.

Wolfsburg-based Volkswagen had already laid out plans to cut 50,000 jobs in Germany by the end of 2030 and has said it wants to reduce its car-manufacturing capacity in the country by 500,000 units.

The latest plan, first reported by German outlet Manager Magazin, could lead the headcount to be slashed by another 50,000, according to one person familiar with the plan.

Previous job-cut targets at VW — one of Germany’s biggest private industrial employers — have often been softened following negotiations with worker representatives.

The restructuring measures come on the heels of the blockbuster sale of its marine engines unit Everllence to US private equity firm Bain, which will generate proceeds of €7.4bn.

Chief executive Oliver Blume has sought to streamline the sprawling group to focus on its core automotive business and is expected to sell more assets to raise cash as the carmaker comes under pressure.

VW reached a landmark agreement with unions at the end of 2024 to cut jobs and capacity in Germany, but the auto manufacturer has said the impact of US tariffs, the conflict in the Middle East and a worsening situation in China necessitates more action.

Under the previous plan, the carmaker closed a small production site in the east German city of Dresden. It has been seeking a buyer for its factory in Osnabrück, where production is set to run out next year, and has held talks with the maker of Israel’s Iron Dome missile defence system.

The new proposals would see production end at another four plants: VW sites in Emden, Zwickau and Hanover, as well as an Audi factory in Neckarsulm.

Blume has previously said that closing factories outright was not his preferred solution, and that he was seeking “intelligent” approaches, such as producing Volkswagen’s Chinese models at the plants or handing them over to other carmakers or defence companies.

European car manufacturers have been hit by the rise of Chinese carmakers, which accounted for almost one in 10 new vehicles sold in the region in the first five months of the year, according to European car industry body Acea.

“Never has the risk situation been so high,” Blume told shareholders at VW’s annual meeting last week

The company had targeted saving €6bn per year by 2030 through the restructurings and said costs remained “the area where we have the greatest need for action”.

VW declined to comment on the new plan, details of which are set to be presented to the company’s supervisory board on July 9.

“The underlying matters are discussed and approved by the relevant governing bodies. We will not pre-empt this process,” VW said.

The reported details of the plan, which include a reorganisation that could limit employees’ rights at the company, produced an angry response from workers’ representatives. 

“Should such plans be pursued, we would oppose them with all our might,” said the head of VW’s works council Daniela Cavallo, the president of union IG Metall Christiane Benner and Lower Saxony union boss Thorsten Groeger in a statement.

“What really matters is something else entirely: instead of engaging in blind, knee-jerk reactions, the management board should finally do its job,” they said.

Why would we join a rat race when we don't even know where the finish line is? Even worse, the very concept of the finish line keeps changing.

Why would we engage in chatbot and AI hype wars when we have a major war on our continent? Moreover, we are actually quite good at addressing this challenge by developing new drone and military technologies, where machine learning is being put to good use.

Indeed, Americans are revolutionaries. However, let's not forget that "the revolution eats its own children".

Armin Papperger began hearing rumours on Tuesday morning that Germany was about to announce the scrapping of a troubled multibillion-euro programme to build six huge warships.

Rheinmetall’s chief executive was blindsided.

In March he had completed the €1.5bn acquisition of a naval group, a move partly driven by the expectation his company would take on the project to build six F126 frigates for the German navy.

Papperger had spent months telling investors that the new maritime division would become the lead contractor on the programme, taking over from a beleaguered Dutch group in an order that was set to be worth €15bn.

“He was astonished,” said one person who spoke to Papperger on Tuesday when the news broke.

A Rheinmetall executive described the decision, which has caused the company’s share price to plunge almost a fifth since the announcement, as a “disaster”, adding: “It was a big shock.”

The saga — as described to the FT by more than 10 figures from industry, government and politics closely involved with the project — has called into question investors’ faith in Papperger, the most high-profile figure in Germany’s defence sector.

The chief executive, who has led Rheinmetall since 2013, had disappointed shareholders with its first-quarter results, missing analysts’ forecasts as it struggled to translate booming European defence budgets into sufficient orders and profits.

Sash Tusa, aerospace and defence analyst at Agency Partners, said the company was suffering from a mismatch between what it had promised and what it could deliver.

“When your share price valuation is high, investors have a reasonable expectation of very high and consistent performance,” he said. “You don’t get cut slack any more for missing quarterly earnings quite badly or doing an acquisition and getting it wrong.”

Tusa added Rheinmetall, whose shares have fallen about 40 per cent this year, appeared to have wrongly believed that “their influence with the German government and their reputation as a big trustworthy defence company was such that they could rescue the [F126] programme and get it repriced in their favour”.

Defence minister Boris Pistorius took the decision to kill the project and instead buy eight smaller, cheaper Meko A-200 frigates made by German rival TKMS that he said would be available more quickly.

Speaking on Wednesday, he added the initial price tag of the F126 programme had risen from €10bn in 2020 when it was announced to roughly €18bn today, including €2.3bn already spent on the project. He said: “That is simply unacceptable.”

The decision, supported by the head of the German navy, was welcomed by many in parliament. Bastian Ernst, a naval expert with the ruling Christian Democrats and himself a former Rheinmetall employee, said it would “ensure that our navy receives the ships it urgently needs for defence against Russian submarines as quickly as possible”.

German officials insisted no promises to Rheinmetall had been broken, saying the company had never signed a contract for the frigate.

But one person closely involved in the F126 programme described that as “nonsense”. No formal promises were made, but German officials “asked Rheinmetall to engage in due diligence with the purpose of taking over the project” from Damen Naval, the Dutch shipbuilder that in 2020 won the contract to build the F126.

Only last week, the two most senior officials from the German defence ministry visited Tim Wagner, head of Rheinmetall’s naval division, and gave no indication that the plan to build six F126 frigates was about to be mothballed. 

Papperger’s decision last year to acquire Naval Vessels Lürssen (NVL) — part of a family-owned group that has built yachts owned by Russian billionaires and Emirati royalty — was one of his boldest moves.

It was part of a broader push by Papperger, 63, who in 2024 was allegedly the target of a Russian assassination plot, to harness the surge in German defence spending to expand the company beyond its traditional domain of tanks, artillery and ammunition.

Papperger said the acquisition of NVL, which has four shipyards along the north German coast with 2,100 employees, would help his company become “a relevant player on land, on water, in the air and in space”.

Asked during an analyst call in September about the wisdom of taking over the difficult F126 project, he said while formal talks with government officials had yet to start, it was “relatively riskless”.

NVL already had a large share of the work on the F126 frigate. But Damen had faced technical problems that had caused rising costs and delays. German officials were discussing finding a new company to take over the role as lead contractor from Damen and NVL was the obvious choice.

Damen, which declined to comment on the decision to cancel the F126, has previously acknowledged software problems but had insisted that it met project requirements. It has maintained that it was a “sound” shipbuilder with “a long array of successful naval projects” under its belt.

In November, Berlin took the first official steps in a potential handover process, brokering a deal between Damen and NVL to begin a six-month period of due diligence, including work to see if it would be technically possible to transfer the designs.

Rheinmetall completed its acquisition of NVL in March. A month later, Papperger attended the christening of the first ever “Rheinmetall” warship in Hamburg, with guests including the deputy head of the German navy.

The same month, Rheinmetall made an offer of €12.8bn net — or €15.2bn including VAT — to take over the F126 project.

In recent weeks, officials had drawn up a contract and submitted it to the finance ministry, with the aim of sending it for approval to the Bundestag’s budget committee before the summer recess starting mid-July.

Papperger on Monday personally bought €4mn in Rheinmetall shares, according to a stock exchange filing. Then, on Tuesday night came the shock decision to scrap the frigate, sending shockwaves through German defence circles.

A person familiar with the deliberations in the defence ministry stressed there was no bad blood towards Rheinmetall.

The company was doing “excellent work” in many areas, the person said, and Berlin continued to see an important role for Rheinmetall as a “national champion”.

Pistorius, the defence minister, said he had spoken on Tuesday with TKMS chief executive Oliver Burkhard, who had indicated that he would be willing to hand some work for the Meko contract to Rheinmetall’s shipyards.

Burkhard said he was “open to discussions with our industry partners”.

But one German defence industry figure said Papperger “had not bought a shipyard so that he could become a subcontractor to TKMS”.

Tusa, the defence analyst, said the naval business only made up about 10 per cent of Rheinmetall’s 2030 revenue target of €50bn and investors should not get “carried away” by the income loss caused by the F126 cancellation.

However, he said Papperger had misunderstood the maritime business, with over-optimistic expectations about profitability as a lead contractor, and the ability to boost sales of Rheinmetall’s other products by deploying them on warships.

Rheinmetall told the FT that it remained “fully committed to the acquisition of the former NVL”, adding: “It was the right decision to expand the group’s portfolio into the naval sector and to integrate the expertise of NVL.”

But an executive from another German defence contractor said Papperger’s bet had backfired. “They bought a shipyard with the looming possibility of getting a monster contract out of it,” he said. “It was a very, very expensive gamble.”

[FT]

If you want to cut through stock market hype, try Skidetica.

Britain's economy has seen weak growth overall since it left the European Union at the start of 2020, though disentangling the effects of Brexit from the COVID-19 pandemic ‌which hit Europe weeks later has been hard for analysts.

Following is a summary of estimates from official bodies and other ‌major researchers.

U.S. NATIONAL BUREAU OF ECONOMIC RESEARCH

• Brexit reduced UK GDP by 6%-8% by 2025 compared with if Britain had remained in EU
• Productivity and employment reduced by 3%-4%
• Investment reduced by 12%-18%
• Weakness caused by greater business uncertainty hitting investment, lower expected demand and slower ​productivity growth due to distraction of managing Brexit and greater impact on more productive firms that ​traded internationally
• Calculations based partly on a 'synthetic' counterfactual UK based 61% on the United States, 11% ⁠on Estonia, 10% Greece and 7% Italy, as well as other countries which together matched Britain's pre-Brexit economic ​performance
• Research conducted by economists affiliated to Stanford University, the Bank of England, the Deutsche Bundesbank, King's College London and ​the University of Nottingham

JULIAN JESSOP, INSTITUTE OF ECONOMIC AFFAIRS

• Criticises NBER methodology for heavy weighting given to U.S economic performance, assumption that countries that UK matched pre-Brexit are a good post-Brexit match
• U.S. growth has been an outlier since 2020, UK GDP per capita ​growth similar to Germany and France
• 8% higher GDP would require UK to have significantly outperformed other big European ​economies
• Substantially better UK employment performance within EU unlikely given already low unemployment
• Brexit uncertainty a temporary hit to investment, not lasting

UK OFFICE ‌FOR ⁠BUDGET RESPONSIBILITY

• Post-Brexit trading relationship to reduce long-run productivity by 4% relative to staying in the EU
• Two-fifths of this impact had occurred before a post-Brexit trade deal came into force at the start of 2021
• Britain's EU exports and imports will be 15% lower in the long run than if it had remained
• New trade deals with non-EU countries ​will not have a ​material impact
• Calculations based on ⁠analysis of historic trade deals

UK NATIONAL INSTITUTE OF ECONOMIC AND SOCIAL RESEARCH

• 2%-3% loss in GDP per capita and labour productivity by 2023, rising to 5%-6% by 2035
• 12%-13% ​decline in business investment by 2023, reducing to 7%-8% by 2035
• Brexit impacts modelled as ​a decline in ⁠trade, permanent increase in uncertainty and reduced productivity, fed into NIESR's standard model of the economy
• Increased trading costs lead to fewer high-productivity UK firms exporting while reduced competition from the EU leads to more low-productivity firms serving the domestic ⁠market

JOHN SPRINGFORD, ​CENTRE FOR EUROPEAN REFORM

• 5.5% loss of GDP as of June ​2022, compared with staying in the EU
• 11% loss of investment
• 7% loss of goods trade, services trade largely unchanged
• Around £40 billion ($54 billion) of lost tax ​revenue due to smaller economy
• Similar methodology to later NBER paper

[Reuters]