Alphabet reported second-quarter 2026 revenue of $119.8 billion, up 24% year over year, comfortably beating analyst expectations of $116.9 billion. Google Cloud revenue surged 82% to $24.8 billion, ahead of the $24.56 billion analysts expected and well above the $13.6 billion it brought in a year earlier, with cloud backlog reaching approximately $514 billion. Operating income rose 30% to $40.8 billion, and net income jumped 298% to $112.1 billion, largely due to roughly $98 billion in unrealized equity gains.
Despite beating on nearly every headline metric, shares fell more than 6% after Alphabet raised its full-year 2026 capital expenditure guidance to $195-205 billion, up from a prior $180-190 billion range and above the $186.4 billion analysts had modeled. Quarterly capex hit a record $44.9 billion, more than double the prior year, pushing free cash flow negative for the quarter at -$5.9 billion. CFO Anat Ashkenazi told analysts the increase reflects "an acceleration in the delivery of capacity to meet growing demand," adding that the company remains "in a supply-constrained environment" and expects 2027 spending to increase significantly further.
Alphabet's Gemini App now has 950 million monthly active users, up from a prior 920 million estimate, processing 22 billion API tokens per minute. CEO Sundar Pichai called it "an amazing quarter," while investors continued weighing the scale of AI infrastructure spending against the uncertain timeline for returns — a tension playing out across the industry as capital intensity accelerates faster than most forecasts anticipated.
