Alphabet reported $119.8 billion in quarterly revenue and lifted its 2026 capital-spending forecast to $195 billion-$205 billion. The stock closed 7.13% lower the next day.
Alphabet released its second-quarter results after the U.S. market closed on July 22. Revenue for the quarter ended June 30 rose 24% from a year earlier to $119.80 billion, while operating income increased 30% to $40.77 billion.
The following day, Alphabet Class A shares closed at $317.69, down 7.13% in the regular session. The move came after the company raised its full-year capital-spending forecast and reported quarterly capital expenditures that exceeded operating cash flow.
Google Cloud revenue grew 82%
Alphabet's growth was broad, but Google Cloud posted the fastest increase among its reported business lines.
| Item | Q2 2026 | Year-over-year change |
|---|---|---|
| Total revenue | $119.80B | +24% |
| Google Services revenue | $94.54B | +15% |
| Google Cloud revenue | $24.77B | +82% |
| Operating income | $40.77B | +30% |
Google Cloud operating income rose to $8.81 billion from $2.83 billion a year earlier. Within Google Services, Google Search and other revenue increased 17% to $63.27 billion, while YouTube advertising revenue rose 13% to $11.06 billion.
Net income included a large investment gain
Alphabet reported net income available to common stockholders of $112.11 billion and diluted earnings per share of $9.11. Those figures were boosted by $97.98 billion of other income, which the company said primarily reflected unrealized gains on equity securities.
In other words, $97.98 billion of the quarter's reported income came from outside operating income. Alphabet did not publish an adjusted net-income figure excluding the unrealized gains. Operating margin expanded to 34% from 32% a year earlier.
Quarterly capital expenditures reached $44.9 billion
Alphabet spent $44.9 billion on capital expenditures during the quarter. Cash generated by operating activities was $39.1 billion, leaving free cash flow at negative $5.9 billion.
On the earnings call, the company raised its expected 2026 capital expenditures to a range of $195 billion to $205 billion. Its previous forecast was $180 billion to $190 billion. The increase extends Alphabet's spending on technical infrastructure for artificial intelligence and cloud services.
Investors focused on spending and cash flow
Reuters reported that Alphabet shares were initially volatile but mostly flat in extended trading, then moved lower after Chief Financial Officer Anat Ashkenazi announced the higher capital-spending forecast. The news agency said the decline reflected investor concern about rising AI outlays and whether revenue would grow fast enough to offset capital expenditures, depreciation, and operating costs.
Thomas Monteiro, a senior analyst at Investing.com, told Reuters that a higher spending forecast following a negative free-cash-flow quarter had not been well received. Charu Chanana, chief investment strategist at Saxo Markets, said investors would increasingly examine how much cash had to be reinvested to remain competitive and whether AI revenue could outgrow the associated costs.
The response was not uniformly negative. Reuters reported that at least 20 brokerages raised their Alphabet price targets after the results. Richard Clode, a portfolio manager at Janus Henderson Investors, described Google Cloud's quarter as exceptionally strong and pointed to Alphabet's custom chips, cloud infrastructure, and consumer distribution as competitive advantages.
Shares closed 7.13% lower in the next regular session
Alphabet Class A shares had closed at $342.09 on July 22 before the results. On July 23, they opened at $321.13, traded between $315.07 and $324.26, and finished at $317.69.
That put the completed regular-session decline at $24.40, or 7.13%, following the earnings release and updated capital-spending outlook.