Hey everyone, Hirokichi here. Today I’m covering Alphabet’s (Google’s parent company, GOOGL) second-quarter 2026 earnings, announced on July 22, 2026 (US time). Let’s go beyond the headline numbers and look at how the market reacted and where things are heading next, especially on the AI investment front.
Revenue hits $ 119.8B, up 24% year over year
Alphabet’s Q2 2026 revenue came in at $119.8 billion, up 24% from $96.4 billion a year earlier. That also beat analyst expectations of around $116.9 billion.
Breaking it down by segment, Google Services (search ads, YouTube, and more) brought in $94.5 billion (up 15% year over year), and YouTube ad revenue alone reached $11.06 billion (up from $9.79 billion). But the real standout this quarter was Google Cloud, which I’ll get into next.
What this chart tells us is that Google Cloud is the engine behind the company’s overall growth, expanding far faster than Google Services’ 15% growth rate.
Google Cloud surges 82%, backlog reaches $ 514B
The biggest highlight of this quarter was Google Cloud. Revenue reached $24.8 billion, an astonishing 82% increase year over year. Operating income for the segment also jumped to $8.8 billion, up from $2.8 billion a year ago.
This growth is being driven by demand for AI infrastructure and enterprise AI services. The backlog (contracted revenue not yet recognized) reached $514 billion, up more than $50 billion from the previous quarter. In my view, this backlog growth is the single best clue to where Google Cloud’s revenue is headed next.
Net income up 298% to $ 112.1B, but with a one-time boost
Net income came in at $112.1 billion (up from $28.2 billion a year earlier), a 298% increase. EPS (earnings per share) was $9.11, compared to $2.31 a year ago.
That said, there’s an important caveat behind this huge jump. A $99.0 billion unrealized gain on equity holdings boosted EPS by $6.26. In other words, on top of genuine business growth, a one-time gain from the rising value of Alphabet’s investment portfolio played a large role here. If you want a cleaner read on core business performance, operating income (up 30% year over year) is probably the better number to watch.
Shares swung sharply after the report on capex worries
Despite the strong results, Alphabet’s stock swung sharply after the earnings release. The reason: a higher full-year capital expenditure (CapEx) plan. Alphabet raised its 2026 CapEx guidance from a previous range of $180-190 billion to a new range of $195-205 billion.
While AI investment is clearly paying off in the numbers, investors are growing more cautious about how far spending will climb and what it means for margins. To help fund this, Alphabet issued $49.6 billion in stock in June and raised $20.3 billion through senior unsecured notes during the quarter. Analysts are split too: some, like Bank of America’s Justin Post, raised their price target to $430 on a Buy rating, while others trimmed their targets on concerns about long-term capital spending.
What to watch next: 3 key points
Here are three things I’m personally keeping an eye on going forward.
(1) How fast Gemini adoption grows. Gemini now processes 22 billion tokens per minute, and the Gemini App has reached 950 million monthly active users. Nearly 90% of the Fortune 100 are already using Gemini Enterprise, so the question is whether Google keeps gaining ground in the enterprise AI market (I’ve also covered AI-related stocks more broadly in this article).
(2) Google’s TPU (its custom AI chip) hardware business. External sales are expected to start contributing to revenue later in 2026, with meaningful scale coming in 2027. It’ll be worth watching how much ground Google can gain in an AI chip market that’s been dominated by Nvidia.
(3) The balance between rising CapEx and margins. Every time a capex guidance hike like this one happens, the stock tends to react sharply, and that pattern is likely to continue for a while. Worth watching alongside how competitors like OpenAI and Anthropic are ramping up their own AI investments (covered in this article), since the industry-wide spending race shows no signs of slowing down.
Hirokichi’s take
What stood out to me most in this report is that AI investment is clearly starting to translate into real revenue. Google Cloud’s 82% growth and the ballooning backlog look like solid evidence that all that investment is converting into actual orders. At the same time, the stock swinging every time CapEx guidance gets revised upward is a pattern we’re seeing across big AI-related names, and I suspect that will keep happening quarter after quarter. For anyone holding long-term, I think it makes more sense to track the Cloud segment’s backlog and margins over time rather than react to every single quarter’s share price move.
Let’s keep at it, slow and steady. See you next time!
日本語版はこちら → 【決算まとめ】アルファベット2026年Q2決算（日本語版）
* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.
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