Tesla & Google Earnings Explained: Why AI Spending Is Crushing Stocks

This is Mike Milligan, and welcome to the One of a Kind Financial Show Daily. I'm a Certified Financial Planner, founder of One Oak Financial, and the host of the Ideas by Mike podcast. Today, I'm recording from Grand Junction, Colorado, and it's July 23rd. Liana and I just wrapped up 2 days on the trail, Canyonlands National Park on Tuesday and Arches National on Wednesday, and we drove into Grand Junction last night. So, we're going to talk about that at the end of the show. But first, Alphabet and Tesla reported after the close yesterday. Both companies beat on revenue. Both stocks fell after hours, and the reason why is the story of the year for the American business. Educate, coach, plan. Never miss a moment.

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Yesterday I told you the story of the earnings season was the consumer And AI. Last night we got the biggest AI CapEx numbers we have ever seen from Alphabet and Tesla, and the market reaction was not what most people expected. Uh, the education point here for a second: CapEx means capital expense, meaning how much did the company actually spend on AI integration. So let me give you the numbers. Alphabet, the parent company of Google, their 2nd quarter revenue was $119.8 billion. That's up 24% from a year ago and well ahead of the $116.5 billion Wall Street was looking for. Earnings per share was $9.11, also a beat. Google Cloud revenue jumped 82% from a year earlier. Cloud margins expanded. Usage of Gemini AI model accelerated. On the surface, that is a very good quarter. Then came the CapEx, or capital expense, number. Alphabet had already told investors it would spend $180 to $190 billion on capital projects this year. Yesterday, it raised that guidance to $195 to $205 billion. And the chief financial officer warned investors to expect even higher numbers in 2027. In the 2nd quarter alone, Alphabet spent $44.9 billion, most of it going to AI infrastructure. The free cash flow for the quarter? Negative $5.9 billion. A year ago, the same quarter, Alphabet generated almost $25 That's not a small swing, folks. That's almost $31 billion. Alphabet stock fell around 4% after hours. Tesla, their 2nd quarter revenue was $28.2 billion, a record, up $26 billion from a year ago, well ahead of expectations. 480,126 vehicles delivered, also a record, but the profit picture was thinner. Operating margin was 1.4%, down from 4.1% a year ago. Adjusted earnings per share came in at $0.32. Analysts were looking for $0.53. Tesla is spending money. CapEx in the quarter was up 142%. The full-year CapEx expected to be more than $25 billion, roughly 3 times more than last year. And their free cash flow, meaning the amount of money that's just coming in with no expected outflow, negative $1.1 billion. Tesla is retooling factories for the 2-seater driverless Cybertruck, building Optimus humanoid robots, and starting construction on an AI chip plant in Texas. And Elon Musk said on the earnings call, quote, we should be spending on CapEx as fast as we can spend, as fast as we can without it being too wasteful. It's okay to be a little less capital efficient if we get things done sooner. He compared what Tesla is doing across cars, AI, robots, and chips to Henry Ford and the Model T. He called it, quote, the fastest industrial scale-up since World War II in America, end quote. Tesla stock fell around 4% in after-hours trading last night. So here's the pattern: 2 of the biggest, best-known companies both beat on revenue, both, both are spending unprecedented amounts of money to build AI infrastructure, and both saw their stocks fall because investors are asking a very fair question: when do we start seeing the return on all this spending? That is exactly what happened to Amazon in the late 1990s and early 2000s. Amazon built warehouses. It built cloud infrastructure, what became AWS. It ran negative free cash flow for years. Wall Street punished the stock along the way. And then one day, all those warehouses and all that infrastructure became the moat. The same question is on the table now for the AI buildout. It might pay off in spades. As one analyst said yesterday about Tesla, quote, profitability is being sacrificed for infrastructure, end quote, or might not pay off the way the companies hope. For a financial planning conversation, this is— that is— this is the honest answer. We do not know. That is exactly why we're not chasing returns. We're building a one-of-a-kind financial plan that does not depend on being right about which quarter the AI buildout pays off.

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I want to take you off the markets. Screen for a minute because Liana and I just spent 2 days, uh, we've had together in a very long time hiking Canyonlands on Tuesday and Arches on Wednesday. If you've ever been to Canyonlands, put it on the list. It's not a park you drive through, it's a park you stand still in. Uh, the rivers cut the landscape into 3 districts. We were on the Island in the Sky. You walk out To Mesa Arch at sunrise, and the inner canyon system opens up in front of you, 1,000 feet down, and it just keeps going. It's not loud. Matter of fact, the silence is actually deafening. It is quiet in a way that most American life does not let you experience. This makes the phone feel silly. Wednesday, we drove up to Arches. Different park, different feel altogether. A whole lot more people. But those arches are something you have to see once in your life. Delicate Arch stands out on a slick rock bowl like it's placed— it was placed there. It is a 60-foot arch of sandstone that has been standing on its own for who knows how many thousands of years. It seems it will stand forever. Nothing carved by water and wind and time stands forever, but it's standing today. And we got to stand in front of it together and just realize how small we are in this great world. Here's why I bring it into the financial show, because this is the plan. This is the whole point. We work, we build businesses, we save, we invest, we plan, not that we— so that we could see Mesa Arch at sunrise with the person we love, not just at 75 with a hip replacement, but now. In the years when the legs still work, barely, and the joints still cooperate but hurt at the end of the day. I talk to clients every week who tell me, I will travel when I retire, I will hike when I retire, I will spend time with my spouse when I retire. And I always ask the same follow-up question: why not now? Why not 4 days off the calendar this month? Why not one long weekend or a quarter? A one-of-a-kind financial plan is not a permission slip you get at 65. It's a permission slip you write yourself today so that you can go do the thing while your body, your marriage, and your kids are still ready to do it with you. 2 days in the rocks, no phone signal on most of those trails, just us, the landscape, and time. Never miss a moment.

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And here's the thread: Alphabet and Tesla are spending hundreds of billions of dollars right now on things That they hope will pay off years from now. This is what businesses do. They defer, they invest, they wait. You and I do not have that luxury. We only get so many summers. We only get so many good hiking days. We only get so many quiet mornings at Mesa Arch. The market can wait for the AI build-out to pay off. Your family cannot wait for you to retire. So, build a plan that lets you take the trip now, not later. That's what a one-of-a-kind financial plan is for.

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And finally today, Grand Junction, Colorado. It's a beautiful town at the confluence of the Colorado and the Gunnison Rivers. Fun fact, this is where the world's largest dinosaur was ever found, was discovered in 1900. A paleontologist named Elmer Riggs from the Field Museum in Chicago came out To the Grand Valley on a tip dug into a hillside on what is now called Riggs Hill. It pulled out the first bones of a creature so big that a Chicago newspaper called it, quote, the largest land animal that ever lived. Riggs gave it its name, Brachiosaurus, and it was the largest dinosaur on record for decades. That happened right here in Grand Junction 126 years ago. Sometimes the biggest things in history come out of the smallest towns. Tomorrow on the show, Intel, Honeywell, and a batch of industrial reports. We will keep tracking the AI CapEx story and what it means for the part— for parts of the American economy that are named— that are not named Alphabet and Tesla, and how that impacts the consumer. Educate, coach, play, and never miss a moment. This has been Mike Milligan for the One of a Kind Financial Show Daily. I am an investment advisory representative with Advisory Alpha LLC. Ideas by Mike doing business as One Oak Financial is an unaffiliated entity of Advisory Alpha LLC. This program is for educational purposes only. It's not investment advice, not a recommendation to buy or sell any specific security or product. Past performance is not indicative of future results. Consult your own licensed financial professional before making a decision, or contact One Oak Financial at www.1oakfinancial.com or 757- Lead.

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