NEW YORK, July 24, 2026, 04:11 EDT
- Alphabet NASDAQ:GOOGL and Tesla NASDAQ:TSLA allocated 116% of their joint quarterly operating cash flow to capital expenditures.
- Revenue increased by 24.5%, yet total free cash flow stood at negative $6.9 billion.
The Magnificent Seven lost $797 billion in market capitalization on Thursday. Bloomberg’s collective index dropped 4.8%, marking its steepest decline since April 2025.
The selloff prompted investors to prioritize cash conversion over revenue growth. Sales at both companies climbed above 20%, but each reported negative free cash flow for the quarter.
Combined, they generated an extra $29.1 billion in revenue for the quarter compared to the previous year. Capital expenditures rose by $25.9 billion, equating to roughly 89 cents in capex for every dollar of new sales.
| Q2 2026, $ billion unless stated | Alphabet | Tesla | Combined |
|---|---|---|---|
| Revenue | 119.8 | 28.2 | 148.0 |
| Year-on-year revenue change | 24% | 26% | 24.5% |
| Capital expenditure | 44.9 | 5.8 | 50.7 |
| Capex as percentage of operating cash flow | 115% | 123% | 116% |
| Free cash flow | -5.9 | -1.1 | -6.9 |
The numbers remain unaudited. Aggregated totals reflect company-reported data. Tesla’s capital expenditures count purchases for energy generation and storage systems.
Alphabet increased its expenditure as it saw Google Cloud revenue surge 82% to $24.8 billion. The segment’s operating margin climbed to 35.6%.
However, Alphabet’s expenditures totaled $44.9 billion, compared to its operating cash flow of $39.1 billion. The company also increased its capital expenditure forecast for 2026, now expecting to spend between $195 billion and $205 billion.
Chief Financial Officer Anat Ashkenazi justified the current pace, stating that Alphabet intends to continue investing “as long as we see an attractive return on that investment,” she said. Alphabet Investor Relations
Cloud backlog totaled $514 billion, with Alphabet projecting a little more than half will be recognized as revenue inside 24 months.
Tesla reported a 26% increase in revenue, with vehicle deliveries up 25%. However, its operating margin declined to 1.4%.
The company posted operating cash flow of $4.7 billion. Capital expenditures jumped 142% to $5.8 billion. Free cash flow stood at negative $1.1 billion.
Tesla stock ended the session 14.6% lower. Alphabet declined 7.2%. The S&P 500 slipped 1.2%, with the Nasdaq Composite retreating 2.2%.
The impact extended beyond Thursday. For the week ending July 17, the S&P 500 slipped 1.6%, while the Nasdaq dropped 2.9%. By Thursday this week, both indexes had declined a further 0.7% and 1.5%, respectively.
Broader economic worries compounded worries about liquidity. Brent climbed 7% to close at $100.69. The yield on the 10-year Treasury rose to 4.7%, the highest recorded since January 2025.
Morgan Stanley NYSE:MS strategist Daniel Skelly pointed to “additional pressure from concerns about Mag-7 capex spending levels and surging oil prices.” He noted that summer index trading may stay volatile. Reuters
The regular U.S. cash session had ended at 04:11 EDT on Friday, while Nasdaq premarket trading remained open. The regular session is scheduled to begin at 09:30 EDT.
The Federal Reserve concludes its two-day meeting on Wednesday, with its policy statement expected at 14:00 EDT.
Meta Platforms NASDAQ:META and Microsoft NASDAQ:MSFT will release earnings after the close on Wednesday. Apple NASDAQ:AAPL and Amazon.com NASDAQ:AMZN are set to report on Thursday.
The main comparison next week is capex versus operating cash flow. This ratio highlights the funding pressure prior to any potential AI returns.
Risks go both directions. An increase in oil prices or yields may intensify valuation pressures. More rapid AI revenue growth, or a decrease in capital spending, has the potential to undo Thursday’s shift.
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