TLDR
- Alphabet beat Q2 revenue estimates, posting $119.80 billion against expectations of $116.93 billion
- Google Cloud revenue surged 82% year-over-year to $24.8 billion, well above the 63% growth analysts had forecast
- Capex for Q2 hit $44.9 billion, a 101% jump from the same period last year
- Alphabet raised its full-year capex guidance to $195–$205 billion, up from the prior $180–$190 billion range
- GOOGL stock dropped as much as 4.7% in after-hours trading on the higher spending outlook
Alphabet posted strong second-quarter results on Wednesday, beating revenue estimates by nearly $3 billion. But investors focused on the cost side of the ledger, and the stock fell sharply in extended trading.
GOOGL dropped as much as 4.7% after hours after the company raised its full-year capital expenditure forecast again. The stock had been up about 12% year-to-date heading into the print.
Q2 revenue came in at $119.80 billion, ahead of the $116.93 billion Wall Street expected. Adjusted earnings per share of $2.85 missed the $2.89 consensus estimate slightly.
The headline EPS figure looked different depending on the source. Barron’s cited adjusted EPS of $9.11, well ahead of the $2.88 consensus, with $6.26 per share coming from gains on equity securities — including stakes in Anthropic and SpaceX. That “other income” line added $99 billion in total.
Google Cloud was the standout. Revenue hit $24.8 billion, an 82% year-over-year increase. Analysts had modeled 63% growth. CFO Anat Ashkenazi told analysts the company is still operating in a “supply-constrained environment” with strong demand from both external cloud customers and internal users.
Advertising revenue came in at $81.6 billion, slightly above the $81.3 billion estimate. Search revenue of $63.3 billion was just a hair below the $63.4 billion consensus.
Capex Climbs Again
Capex for the quarter totaled $44.9 billion, a 101% increase from Q2 last year. For the full year, Alphabet now expects to spend between $195 billion and $205 billion — up from its prior guidance of $180 billion to $190 billion.
That spending pushed free cash flow into negative territory for the quarter, coming in at -$5.9 billion.
Alphabet had already signaled its appetite for heavy spending. In June, it announced plans to raise $80 billion through equity sales to fund capex for 2026 and 2027.
The company is funneling money into AI infrastructure as hardware costs rise and demand outpaces supply. Ashkenazi said the company has been flagging supply constraints “for multiple quarters in a row.”
AI Products Gaining Traction
On the product side, the Gemini App now has 950 million monthly active users and can process 22 billion tokens per minute. Google’s Antigravity AI coding tool has reached 2.4 million weekly active users.
CEO Sundar Pichai noted the FIFA 2026 World Cup gave Search and advertising an additional lift during the quarter.
Pichai also addressed the delayed launch of the Gemini 3.5 Pro model, confirming it is still in testing. He said the company is already investing compute into Gemini 4 to compete with Anthropic and OpenAI.
Google debuted three cheaper Gemini models this week as businesses push back on rising token costs from Chinese open-weight competitors.
Alphabet reported negative free cash flow of $5.9 billion for the quarter, driven entirely by capex investment.
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