Alphabet reported second-quarter revenue of $119.8 billion, up 24 percent year over year and comfortably ahead of the $116.93 billion LSEG consensus, then spent the rest of the day telling investors it plans to spend more. Full-year 2026 capital expenditure guidance was lifted to a range of $195 billion to $205 billion, up from $180 billion to $190 billion a quarter earlier and above the roughly $188 billion Visible Alpha consensus, per CNBC.
Google Cloud is the reason. Segment revenue grew 82 percent to $24.8 billion, and the backlog reached $514 billion after a sequential increase of more than $50 billion. Chief Financial Officer Anat Ashkenazi described the business as operating “in a supply-constrained environment” and said Alphabet would “expand the use of third-party capacity in Q3 as a bridging strategy while we build up more internal capacity.”
That’s the tell. A hyperscaler renting from competitors isn’t a company with excess capacity; it’s a company whose demand curve has outrun its own construction schedule.
Google Services still pays for the buildout. The segment produced $94.5 billion, up 15 percent, with Search and Other advertising at $63.3 billion (up 17 percent) and YouTube advertising at roughly $11.06 billion (up 13 percent). Consolidated operating income rose 30 percent, and operating margin expanded two points to 34 percent. Q2 capex of $44.9 billion pushed free cash flow to negative $5.9 billion.
Net income of $112.11 billion, up 298 percent, was flattered by a $99.03 billion gain on equity securities tied to stakes in Anthropic and SpaceX, per CNBC. EPS came in at $9.11. Sundar Pichai told the call that the Gemini App has 950 million monthly active users, that Gemini models process 22 billion API tokens per minute, and that nearly 90 percent of the Fortune 100 use Gemini Enterprise.
Shares rose $2.71 to $344.62 in after-hours trading, per the Associated Press. The market is being asked to underwrite a capex cycle whose payoff sits inside a backlog number half again as large as annual revenue.