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Alphabet posted second-quarter revenue of $119.8 billion on the July 22, 2026, up 24% year-over-year, ahead of the roughly $117 billion analysts had pencilled in. It was the twelfth straight quarter of double-digit top-line growth for Alphabet, which is a streak built on one pillar: artificial intelligence monetisation across Search, YouTube and Cloud.1
Operating income climbed 30% to $40.8 billion, with margins expanding to roughly 34%, even as total operating expenses rose 27% on heavier R&D and marketing spend. Net income, however, is where the quarter turns into a headline-writer’s dream: GAAP net income rose 298% year-over-year to $112.1 billion, with diluted EPS of $9.11, but that figure was inflated by a roughly $99 billion unrealized gain on equity securities, dwarfing the $1.2 billion booked a year earlier. [1] Strip that out, and the more comparable non-GAAP EPS came in at $2.85, narrowly missing the $2.89-$2.95 consensus range cited across sell-side desks.2
Google Cloud revenue surged 82% year-over-year to roughly $24.8 billion, accelerating sharply from 63% growth in Q1 and easily clearing the $22.5-24.6 billion analysts had modelled. 3Cloud operating income more than tripled to $8.8 billion from $2.8 billion a year earlier, and perhaps more tellingly for the AI infrastructure thesis the segment’s backlog swelled to $514 billion, up more than $50 billion sequentially, with management guiding that just over half of that backlog should convert to revenue over the next 24 months. 3 Google also recognized more than $1 billion in TPU hardware sales for the first time this quarter, a signal that its custom silicon strategy is starting to show up directly in the top line.4
Away from Cloud, the legacy advertising businesses proved anything but legacy. Search & Other revenue rose 17% to $63.3 billion, as AI Overviews and AI Mode extend Google’s monetisation of an AI-native search experience. YouTube advertising revenue grew 13% to roughly $11.1 billion, while the “subscriptions, platforms and devices” bucket, Play Store, hardware and non-ad YouTube revenue rose 15% to about $12.9 billion. Google Services as a whole grew 15% to $94.5 billion. Other Bets, the perennial drag, generated just $382 million in revenue against a $1.8 billion operating loss, as Waymo and other moonshots continue to burn cash.1
Alphabet raised guidance and still got punished. Management lifted its 2026 capital expenditure forecast to a range of $195 billion to $205 billion, up from the $180–190 billion flagged just one quarter ago, and well above the roughly $186–188 billion Wall Street had modelled.[5] CFO Anat Ashkenazi reiterated that Google remains in a supply-constrained environment on AI infrastructure and is leaning on third-party capacity to bridge the gap, which may be a signal of potential margin pressure ahead.
Alphabet shares fell after the earnings release, as investors weighed the accelerating cloud business against the spending trajectory that shows no sign of plateauing. However, the shares rebounded quickly, and the price is up around 10% since pre-earnings date. Second-quarter operating cash flow of roughly $39.1 billion was outrun by $44.9 billion in capital spending, nearly double the $22.4 billion spent in the same period last year, pushing free cash flow to negative $5.9 billion and compressing the free-cash-flow margin from the low-20s percentage range toward roughly 9%.6
To bankroll the buildout, Alphabet raised $49.6 billion through an equity offering in June and a further $20.3 billion via senior unsecured notes during the quarter, with proceeds explicitly earmarked for AI infrastructure and global compute capacity.2Some reporting points to a broader equity-raising plan of up to $80 billion, reportedly including a private placement tied to Berkshire Hathaway, underscoring just how unusual it is for a company of Alphabet’s cash-generating scale to be tapping capital markets this aggressively for capex. The board also declared a quarterly dividend of $0.22 per share across its Class A, B and C stock, payable on September 14, 2026. The dividend is a modest but steady signal alongside the spending surge.3
Alphabet’s results also reinforce that the AI race is increasingly becoming a battle of financial strength rather than simply technological capability. Microsoft, Amazon, Meta and Alphabet are collectively committing hundreds of billions of dollars toward AI infrastructure over the coming years. Success will ultimately depend not only on developing leading AI models, but also on monetising them efficiently across cloud services, enterprise software and consumer applications.
Alphabet continues to possess one of the strongest competitive positions within the AI ecosystem. The combination of Search, YouTube, Android, Gemini and Google Cloud provides multiple avenues to monetise artificial intelligence at global scale. While elevated capital expenditure may continue to pressure free cash flow over the near term, the company acceleration of its cloud business suggests these investments are already generating meaningful commercial returns. The dramatic acceleration in Cloud growth suggests that enterprise customers are rapidly adopting Gemini-powered products, AI infrastructure and Google’s custom TPU offerings.
Investors may be underestimating the speed with which Alphabet is converting AI investment into profitable revenue growth, particularly as Cloud margins continue expanding. Based on the latest results, the 82% cloud growth, 17% Search growth and the first-ever TPU revenue recognition is evidence that AI spend is already generating returns. However, despite the strong headline results, the stock may struggle to push above $430 in the near-term, given the scale of the ongoing investment.
Source: TradingView. Google daily price chart as of August 3, 2026.
Professional investors looking for magnified exposure to Alphabet may consider Leverage Shares +3x Long Alphabet or -3x Short Alphabet ETP.
Note a piè di pagina:
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
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