Alphabet Inc.

Alphabet reported Q2 2026 consolidated revenues of $119.8 billion, up 24% year over year, or 23% in constant currency. Operating income rose 30% to $40.8 billion, and operating margin was 34%. Google Services revenue was $94.5 billion, up 15%; Search and other revenue rose 17% to $63.3 billion; YouTube advertising revenue grew 13% to $11.1 billion; and Network advertising revenue was down 1% to $7.3 billion. Google Cloud revenue increased 82% to $24.8 billion, with operating income of $8.8 billion and operating margin of 35.6%, while Cloud backlog reached $514 billion, up more than $50 billion sequentially. Cash flow from operations was $39.1 billion in the quarter and $185.7 billion over the trailing 12 months; capex was $44.9 billion in Q2, leading to negative free cash flow of $5.9 billion. The company ended with $242.5 billion in cash and marketable securities and $98.2 billion in long-term debt. For Q3, management said they expect a slight FX headwind at current spot rates, and on full-year 2026 they raised CapEx guidance to $195 billion-$205 billion. They also said TPU system sales will ramp through 2026, with the vast majority of revenue from those agreements expected in 2027, and that expanded use of third-party capacity in Q3 will create modest near-term margin pressure.

Sundar Pichai framed the quarter as evidence that Alphabet’s AI investments are driving momentum across Search, YouTube, and Cloud. He said the company is still in the “early innings” of a secular shift, repeatedly emphasizing that demand across consumers, developers, and enterprises is outpacing supply and that the company is “more bullish” on the opportunity than a year ago. He also highlighted rapid product adoption, including Gemini models, AI Mode, Gemini Enterprise, and Waymo progress, and presented the tone as confident and execution-focused.

Anat Ashkenazi said Q2 delivered another strong quarter with 12 straight quarters of double-digit revenue growth, but also highlighted rising investment intensity. She cited $44.9 billion of capex in Q2, a new full-year 2026 CapEx range of $195 billion-$205 billion, and noted that higher technical infrastructure spending will pressure depreciation, data center operations, and free cash flow. She also said the company ended with $242.5 billion in cash and marketable securities, generated $39.1 billion of operating cash flow in the quarter, and is using a mix of operating cash flow, debt, and equity to maintain a resilient balance sheet.

Analysts focused on ROI from GenAI spending, the pace of model releases, TPU strategy, capital structure, and capacity constraints. Management answered that the GenAI opportunity is still early, that Alphabet is increasingly bullish on returns, and that it plans to keep investing as long as the expected return remains attractive. On TPUs, Sundar said priority goes first to frontier model development and then to serving consumer and enterprise demand, while Anat said TPU system sales are in backlog, revenue will mostly hit in 2027, and near-term cloud margins will face pressure from third-party bridging capacity.