Alphabet Inc.

NASDAQ Global Select
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Bullish +62

Alphabet earnings updates: Stock sinks during analyst call as company hikes 2026 capex

📈 Alphabet reported Q2 revenue of $119.8 billion, beating the $116.93 billion consensus estimate.

☁️ Google Cloud revenue surged 82% year-over-year to $24.8 billion, driven by AI infrastructure demand.

💰 The company raised its 2026 capital expenditure guidance to a range of $195 billion to $205 billion.

🤖 Alphabet's stake in Anthropic and SpaceX contributed a $99 billion gain on equity securities to the P&L.

⚠️ Finance chief Anat Ashkenazi cited a supply-constrained environment, necessitating third-party capacity usage.

📉 Search revenue grew 17% to $63.3 billion but slightly missed the $63.4 billion analyst expectation.

🚀 CEO Sundar Pichai confirmed active development of Gemini 4 to compete with frontier model makers.

🔧 Google is releasing cheaper Gemini models to address rising token costs and competition from Chinese tools.

📉 YouTube ad revenue growth is expected to slow as the user base expands past 3 billion users.

🚗 Waymo continues international expansion, operating commercially in 11 U.S. metro areas.

Bullish Signals
  • Google Cloud revenue jumped 82% year-over-year to $24.8 billion, significantly outpacing competitors like Amazon and Microsoft.
  • Alphabet posted a massive $99 billion gain on equity securities due to appreciation in its stakes in Anthropic and SpaceX.
  • Total Q2 revenue of $119.8 billion exceeded Wall Street expectations of $116.93 billion.
  • Search revenue grew 17% year-over-year, demonstrating resilience despite macroeconomic concerns.
  • The company successfully launched three new, cheaper Gemini models to compete with rising token costs and open-source rivals.
  • Antigravity AI coding tool gained traction with 2.4 million weekly active users, indicating strong developer adoption.
  • YouTube ad revenue rose 13% to $11.06 billion, topping analyst estimates of $10.81 billion.
  • Waymo continues to expand its autonomous ride-hailing footprint internationally and in the U.S.
Risk Factors
  • Alphabet raised its 2026 capex guidance to as high as $205 billion, signaling aggressive spending that may pressure margins.
  • The company plans to utilize third-party cloud capacity in Q3, which Ashkenazi admitted will create modest near-term margin pressure.
  • Search revenue of $63.3 billion slightly missed analyst expectations of $63.4 billion, raising concerns about future growth sustainability.
  • The company faces intensifying competition from Chinese open-weight tools and businesses cracking down on rising token costs.
  • CEO Pichai noted that the company is delaying the launch of Gemini 3.5 Pro while testing Gemini 4, potentially slowing product iteration.
  • SpaceX shares have declined nearly 33% since the second quarter ended, which may impact the valuation of Alphabet's equity holdings.
Full Analysis
Alphabet reported second-quarter earnings that beat revenue expectations, driven by an 82% year-over-year surge in Google Cloud revenue to $24.8 billion and a 17% increase in Search revenue. Total revenue reached $119.8 billion, surpassing analyst estimates of $116.93 billion. However, the stock faced headwinds as investors reacted to the company's decision to significantly raise its capital expenditure guidance for 2026. To meet surging artificial intelligence demand amidst a supply-constrained environment, Alphabet increased its full-year capex forecast to between $195 billion and $205 billion. Finance chief Anat Ashkenazi highlighted that the company is expanding the use of third-party computing capacity from providers like CoreWeave and Nebius as a bridging strategy while building internal infrastructure. This shift is expected to create modest near-term margin pressure but is viewed as highly ROI-positive over the lifetime of the deals. The earnings report featured a massive $99 billion gain on equity securities, primarily driven by Alphabet's stakes in Anthropic and SpaceX, which boosted total profit to $112.1 billion. CEO Sundar Pichai emphasized continued investment in AI models, including the development of Gemini 4, and noted strong adoption of tools like Antigravity AI coding. Despite the robust cloud growth, the stock dipped during the analyst call as investors weighed the high spending trajectory against search revenue that slightly missed expectations. Looking ahead, Alphabet faces scrutiny over its aggressive spending plans for 2027, with analysts estimating capex could rise further to $262 billion or more. The company is also navigating a competitive AI landscape, releasing cheaper Gemini models to counter rising token costs and intensifying competition from Chinese open-weight tools. While the digital ad market remains resilient due to events like the World Cup, growth in YouTube advertising revenue is expected to decelerate as the platform scales past 3 billion users.