TOP STORY
📉 Google Sinks 9% and Tesla Falls 19% as Big Tech Earnings Season Arrives

Big Tech earnings season has officially begun, with Google ($GOOG) and Tesla ($TSLA) both reporting their earnings and falling 9% and 19%.

📉 This pulled down the major indexes, most notably the tech-heavy Nasdaq-100 (although it’s worth noting that the Nasdaq-100 is still up a healthy 11.6% year-to-date). Over the week:

• The S&P 500 fell -0.61%

• The Nasdaq 100 fell -1.62%

• The TSX rose +0.31%

💡 A few other quick macro stories worth mentioning before we dive into earnings:

• 💸 Tariffs season is back, with Trump announcing a global 10% tariff on 60 countries (including Canada, the UK, the EU, and more), replacing the expiring tariffs that were struck down by the Supreme Court and arguing the tariffs are in response to “forced-labor enforcement failures”.

• 🛢️ Oil hit $100 for the first time since May after U.S.-Iran strikes resumed. According to Trump, the U.S. and Iran “remain in talks,” and he believes Iran is “getting more serious” about a peace deal.

🤿 With those covered, let’s get into the big story of the week: Google’s earnings and see what they mean for the market at large.

📉 Google Falls 9% as the Company Reports Negative Cash Flow for the First Time Ever

🏆 On Wednesday, Alphabet ($GOOG) reported its Q2 2026 earnings results, and by almost every measure, it was a blowout quarter.

📊 By the numbers:

• ✅ Revenue: $119.8 billion vs. $116.9 billion expected, +24% year-over-year

• ✅ Google Cloud Revenue: $24.8 billion vs. $22.5 billion expected, +82% year-over-year (up from 63% growth just last quarter)

• ✅ Earnings per Share: $9.11 vs. $2.88 expected, +294% year-over-year (distorted by a ~$100 billion gain on equity investments, mainly Google’s stakes in Anthropic and SpaceX ($SPCX))

💡 One interesting stat: since the market’s fears of ChatGPT “destroying” Google Search back in early 2023, Google Search revenue has grown 44%, or +$75 billion annually. This revenue addition alone is roughly 3x more than the total revenue OpenAI has generated in its entire history, meaning AI is helping and not hurting Google’s search business.

☁️ Cloud (And CapEx) Grows at an Unprecedented Rate

🚀 The headline number this quarter was Cloud, which accelerated to a massive 82% year-over-year growth rate, up from 63% in Q1 and 48% in Q4 2025.

📈 This marks Google Cloud’s third straight quarter of growth acceleration, something that almost never happens for a cloud business at this size (where growth typically decelerates as the business matures).

💰 Perhaps even more important than revenue growth was Google’s cloud operating margin, which also grew to 35.6% (up from 20.7% a year ago). This means top-line revenue and bottom-line profitability are growing together, something management says is due to continued high demand for these services:

🏗️ And “invest” is exactly what Google is doing, with management raising its FY 2026 CapEx guidance to $195-205 billion (aka its AI spending), up from $180-190 billion last quarter (its second quarterly hike in a row), and Google CEO Sundar Pichai confirming that 2027 spending will climb even higher.

🤔 So why did the stock fall 9% if the earnings were so good? The reason is cash flow: with the massive increases in AI spending, this quarter marked the first quarter since its IPO in 2004 that Google reported negative free cash flow, a sharp reversal from the cash printing machine Google has become known as…

👀 But before we dive deeper and look at how big a concern this is for the AI market at large. But first, a quick word from this week’s sponsor, Harvest ETFs!

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TOP STORY CONT.
😰 Google Records Its First-Ever Negative Cash Flow

🤖 One of the recurring themes of the AI race has been worries about AI overspending, and questions around just how sustainable all this massive AI spending is.

😬 Basically, the argument is that all this AI revenue growth is great, but AI costs are rising much faster than operating cash flow as Big Tech races to build out AI infrastructure.

💸 And with Google’s massive AI CapEx raise (plus a ~$5 billion EU antitrust fine) Google officially reported negative FCF for the first time ever, bringing Google into the same camp as Amazon, which hit negative cash flow in Q1.

😬 All this is spooking investors as Google has previously been seen as the tech giant best placed to withstand the AI arms race, using cash flows from its vast search business to cover the costs. So seeing Google now spending more than what it’s bringing in has some investors nervous.

💬 A few quotes from analysts emphasize the concern:

😬 A Bad Omen for Big Tech?

💰 Now it’s not like Google is anywhere near running out of money. Despite the $6B in negative free cash flow, Google holds $242.5 billion in cash and equivalents on its balance sheet and has no problem raising more funds when needed (they just raised $49.6 billion in stock and debt in June, on top of $20.3 billion in low-cost debt issued during the quarter).

😬 But the worry is that if investors are getting increasingly spooked by tech giants’ massive capex spending (and whether it will bring in enough new AI revenue to justify the hundreds of millions being spent), the stock may continue to fall, or worse, big tech might be pressured to rein in the spending.

🗓️ But before we draw any more conclusions, let’s see how the market reacts to Amazon, Meta, and Microsoft’s earnings (and likely capex increases) to see whether this is a warning sign of a broader problem for Big Tech or just some temporary post-earnings jitters.

🗞️ Ok, let’s move on to our final big story of the week, Tesla’s 19% post-earnings drop. But first, a quick word from our other sponsor this week, Wealthsimple!

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BIG TECH EARNINGS CONT.
⏰ Tesla Shares Plummet 19% As Investors Grow Impatient on Delayed Promises

📈 Tesla ($TSLA) also reported Q2 2026 results Wednesday, and the headline numbers looked genuinely strong relative to past quarters.

📊 By the numbers:

• ✅ Revenue: $28.24 billion vs. $26.40 billion expected, +26% year-over-year (a new record, beating estimates)

• ✅ Deliveries: 480,126 vehicles, +25% year-over-year (the company’s best-ever Q2 and its first year-over-year delivery growth in roughly 2 years)

• ✅ Active Full Self-Driving (FSD) subscriptions: 1.48 million, +56% year-over-year, with more than 55% of North American deliveries now including FSD

😬 Profitability Takes a Nosedive

💥 But despite a beat on revenue, Tesla's profitability took a dive this quarter, with operating income collapsing 57% to about $398 million, while its operating margin fell to just 1.4% (down from 4.1% a year earlier).

🚗 Most of this drop can be attributed to lower average sale prices on the Model 3 and Y (following the discontinuation of the Model S and Model X) and fading regulatory EV credits. But similar to Google, the bigger culprit was CapEx.

🏗️ Thanks to Tesla’s aggressive push into AI, robotics, and self-driving infrastructure, CapEx this quarter surged 142% to roughly $6 billion, sending FCF negative by about $1.1 billion, the company’s first negative FCF quarter in over two years. The company now projects $25 billion in CapEx for 2026, and expects that cost to rise over the coming years:

📉 Like Google, it seemed investors were spooked by the capex increase, with Tesla shares falling ~15% after earnings. By Friday’s close, the stock had slid nearly 19%, making Tesla the worst-performing Magnificent Seven stock of 2026 so far (down 28% year-to-date).

⏰ Investors Grow Impatient On Delayed Promises

🥲 But numbers aside, perhaps a bigger frustration for investors is the delayed promises.

🚗 On the earnings call, Tesla executives had to respond to investors frustrated by the slow rollout of its Robotaxi ride-hailing service, which Musk had said in January would be in a quarter to half the US by the end of the year.

🦾 Investors were also frustrated when Musk continued to tease a future demonstration of Tesla’s third-generation Optimus robot, which he previously said would be ready in the first quarter.

💬 As one Tesla fan put it:

🏆 But even with the drop, Tesla remains the 9th Most Valuable company in the world, with investors placing a premium on Elon’s ambitious product roadmap. The challenge for Elon now is execution.

🚀 Beyond the company’s results, Musk was also asked about the potential of merging Tesla with SpaceX ($SPCX) on the earnings call, to which he said:

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