Alphabet capex surge contrasts Apple buybacks ahead of earnings
As Alphabet and Apple prepare to report second-quarter results this month, investors face a choice between a tech giant sacrificing cash flow for AI infrastructure and another returning record capital to shareholders.
Alphabet reports second-quarter results after the bell on July 22, with Apple following on July 30. The upcoming releases set up a stark contrast in how the world's largest technology companies are managing their balance sheets. One is pouring capital into industrial-scale compute, while the other is rewarding shareholders through massive buybacks.
Alphabet’s first quarter showed the heavy financial toll of this infrastructure push. Revenue hit $109.90 billion, up 21.8% year over year, but capital expenditure more than doubled to $35.67 billion. Free cash flow fell 46.6% to $10.12 billion as the company guided for total 2026 capital spending between $175 billion and $185 billion.
The spending is driving cloud growth, which surged 63% to $20.03 billion and pushed the cloud backlog to over $460 billion. "Our AI investments and full stack approach are lighting up every part of the business," Sundar Pichai told investors. Search revenue grew 19%, and Gemini processing via direct API reached 16 billion tokens per minute.
Apple is executing a fundamentally different playbook. The company posted March quarter revenue of $111.18 billion, up 16.6% year over year, with earnings per share of $2.01 marking an eighth consecutive beat. Greater China rebounded to $20.50 billion.
iPhone revenue drove the results, hitting $56.99 billion on strong iPhone 17 demand, while services reached an all-time high of $30.98 billion. Rather than reinvesting heavily in physical infrastructure, Apple is returning cash. The board authorized a fresh $100 billion buyback and raised the dividend 4% to $0.27 per share.
Tim Cook called it "our best March quarter ever," supported by a gross margin near 46.9% and an installed base exceeding 2.5 billion active devices. The divergent strategies present different risk profiles for market participants. Apple shares have rallied 20% and trade at a 43 price-to-earnings ratio, pricing in continued hardware and services momentum.
Alphabet shares have pulled back 4%, a setup that values the company as an AI infrastructure play still paying the tuition for compute scarcity. Investors must weigh Alphabet's collapsing near-term cash flow against Apple's premium valuation heading into the July reports.
