Alphabet Inc., the parent of Google, has delivered a robust second-quarter result that exceeded expectations across revenue and earnings, but investors are now turning their attention to the company’s ambitious capital spending plans.
Alphabet reported June quarter results after the close on Wednesday 22 July. Revenue rose 24 percent year on year to $119.8 billion, ahead of the roughly $117 billion consensus. Reported earnings per share of $9.11 beat the $2.91 estimate by a margin that requires explanation: other income included a net gain of about $98 billion, mostly unrealised gains on equity securities, which lifted net income to $112.1 billion. Operating income, which excludes those gains, rose 30 percent to $40.8 billion, with the operating margin expanding two percentage points to 34 percent.
| Metric | Actual | Consensus |
| Revenue | $119.8bn | ~$117.0bn |
| EPS (GAAP) | $9.11 | $2.91 |
| Cloud revenue | $24.8bn | $22.5bn |
Google Cloud supplied the growth story. Segment revenue rose 82 percent to $24.8 billion, well clear of the $22.5 billion estimate, and the segment’s operating margin reached 35.6 percent, up from 20.7 percent a year ago. Cloud backlog grew by more than $50 billion during the quarter to $514 billion, with about half expected to convert to revenue within 24 months. Google Services revenue rose 15 percent to $94.5 billion, and YouTube advertising brought in $11.1 billion, up from $9.8 billion. Sundar Pichai told investors the Gemini app has 950 million monthly active users and that nearly 90 percent of the Fortune 100 now use Gemini Enterprise.
The market looked past all of that and focused on the spending. Quarterly capital expenditure reached a record $44.9 billion, up 107 percent year on year, with roughly 60 percent going to servers. Management raised full-year 2026 capex guidance to $195 to 205 billion, from $180 to 190 billion last quarter, and said 2027 spending would increase significantly beyond that. Free cash flow turned negative at $5.9 billion, against positive $10.4 billion a year ago. Alphabet ended the quarter with $242.5 billion in cash and marketable securities and recently raised $100 billion in debt. CFO Anat Ashkenazi described a supply-constrained environment and said the company would lease third-party data centre capacity in the third quarter, which will pressure Cloud margins modestly.
Shares fell about 5 percent in after-hours trade, a familiar sequence for hyperscaler earnings this cycle: beat on revenue, raise the capex number, watch the stock go down. Combined 2026 capex across Amazon, Microsoft, Alphabet and Meta is now tracking toward roughly $725 billion, up 77 percent on 2025.
