Alphabet Q2 Earnings Beat Estimates as AI Spending, Google Cloud Growth Fuel Outlook

Alphabet (NASDAQ: GOOGL) delivered stronger-than-expected second-quarter 2026 results, driven by rapid growth in Google Cloud and continued investment in artificial intelligence infrastructure. Despite beating Wall Street expectations on both revenue and earnings, the company's shares slipped 3.4% in after-hours trading as investors weighed its sharply higher capital spending plans.

The Google parent reported earnings per share of $9.11, significantly above analyst estimates of $2.88. Revenue climbed 24% year over year to $119.8 billion, surpassing the consensus forecast of $116.52 billion. Operating income increased 30%, while the operating margin expanded to 34%, marking the company's 12th consecutive quarter of double-digit revenue growth.

Alphabet nearly doubled capital expenditures during the quarter, spending $44.9 billion on property and equipment compared with $22.4 billion a year earlier. The company also completed a $49.6 billion equity offering to help fund AI infrastructure, data centers, and other corporate initiatives. Reflecting growing demand for AI services, Alphabet raised its full-year capital expenditure guidance to $195 billion-$205 billion from its previous outlook of $180 billion-$190 billion.

CEO Sundar Pichai said AI investments are driving momentum across Google Search, Cloud, YouTube, and enterprise products. Nearly 90% of Fortune 100 companies now use Gemini Enterprise, while Gemini models process 22 billion API tokens every minute. The Gemini app has also reached 950 million monthly active users.

Google Cloud emerged as the standout performer, with revenue surging 82% to $24.8 billion as businesses increased spending on AI infrastructure, generative AI tools, and cloud services. Google Services revenue rose 15%, supported by continued strength in Search advertising, YouTube, and subscription products.

Alphabet also revealed that Google Cloud's backlog expanded to $514 billion. Pichai said the company has more than doubled its pace of customer acquisition, while existing customers are spending over 50% more than their contractual commitments.

Deepwater Management's Gene Munster called the cloud results a "massive beat," arguing the performance highlights Alphabet's strengthening position in the AI race against Microsoft, Amazon, and other major technology rivals.