Alphabet Inc.

Alphabet reported Q2 2026 consolidated revenues of $119.8 billion, up 24% year over year, or 23% in constant currency. Operating income increased 30% to $40.8 billion, with operating margin at 34%. Google Services revenues were $94.5 billion, up 15%; Search and other advertising revenue rose 17% to $63.3 billion; YouTube advertising revenue rose 13% to $11.1 billion; and Network advertising revenue declined 1% to $7.3 billion. Google Cloud revenue grew 82% to $24.8 billion, operating income more than tripled to $8.8 billion, and operating margin expanded to 35.6%; Cloud backlog reached $514 billion. Operating cash flow was $39.1 billion, CapEx was $44.9 billion, free cash flow was negative $5.9 billion, and cash and marketable securities totaled $242.5 billion. For Q3, management said FX should be a slight headwind versus a 1 percentage point tailwind in Q2, Search will lap an acceleration that began in Q3 last year, and Cloud should see strong growth; full-year 2026 CapEx guidance was raised to $195 billion-$205 billion from $180 billion-$190 billion.

Sundar Pichai framed the quarter as evidence that Alphabet’s AI investments are translating into product momentum across Search, YouTube, Cloud, and developer tools. He emphasized that the company is still in the “early innings” of a secular shift and said he is “more bullish” than a year ago on the ROIC opportunity because adoption is broadening across consumers, enterprises, and developers. He also stressed frontier-model progress with Gemini 4 training underway, while noting that supply constraints are still real and force prioritization across training, serving, and customer demand.

Anat Ashkenazi highlighted the financial strength of the quarter but also the cost of scaling AI infrastructure. She cited $119.8 billion in revenue, $40.8 billion in operating income, $39.1 billion in operating cash flow, and $44.9 billion of CapEx, which drove negative free cash flow of $5.9 billion in the quarter. She also pointed to the balance sheet with $242.5 billion in cash and marketable securities, $98.2 billion of long-term debt, and a newly declared quarterly dividend of $0.22 per share. Looking ahead, she said third-quarter revenue will face a slight FX headwind, third-party capacity will create modest near-term Cloud margin pressure, and full-year CapEx is now expected to be $195 billion-$205 billion.

Analysts focused on whether Alphabet can sustain frontier-model leadership, how quickly Gemini can improve in coding and agentic use cases, and how much more CapEx is needed to relieve supply constraints. Management said the frontier remains dynamic, but Alphabet is committed to staying at the leading edge and is accelerating model release cadence, with Gemini 4 described as a more ambitious larger base model and more frequent iterations planned. Questions also centered on TPUs, with management saying TPU allocations will first support frontier development and core serving needs, while external demand is being balanced through systems placed in customer or third-party data centers. On capital structure, Anat said funding will come first from operating cash flow, then debt and equity as needed, while maintaining a resilient balance sheet.