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    GOOGL
    Earnings call· Jun 2026(Q2 FY26)

    Alphabet Inc. GOOGL

    Jul 22, 2026 Source

    Executive summary

    Alphabet Q2 FY26 — Strong AI-driven Growth Across Search, Cloud, and YouTube

    Alphabet delivered robust Q2 FY26 results, fueled by significant AI investments driving strong growth in Search, Cloud, and YouTube. The company is navigating supply constraints by increasing CapEx and utilizing third-party capacity, aiming to capitalize on the expanding AI opportunity across consumer and enterprise segments while maintaining a resilient balance sheet. Management remains bullish on the long-term return on investment from its full-stack AI approach.

    Highlights

    5

    • Consolidated revenue grew 24% year-over-year to $119.8 billion.

    • Cloud revenue grew 82% to $24.8 billion, with operating income tripling to $8.8 billion and margin expanding to 35.6%.

    • Search and Other revenue grew 17% to over $63 billion, driven by retail and finance.

    • Gemini app reached 950 million monthly active users, with daily active users tripling in the last year.

    • Cloud backlog increased by over $50 billion sequentially to $514 billion, driven by Enterprise AI demand.

    Concerns

    4

    • Negative free cash flow of $5.9 billion in Q2 FY26 due to CapEx investments.

    • CapEx guidance increased to $195 billion-$205 billion for FY26, up from $180 billion-$190 billion.

    • Anticipated slight FX headwind to consolidated revenue in Q3 FY26.

    • Modest margin pressure in Google Cloud in the near term due to expanded use of third-party capacity.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2026 CapEx
    $195 billion to $205 billion
    high materiality
    High
    Q3 2026 Consolidated Revenue FX impact
    slight FX headwind
    medium materiality
    High
    Cloud revenue recognition from TPU system sales
    relatively small portion this year, vast majority in 2027
    medium materiality
    High
    Cloud margin pressure
    modest margin pressure
    medium materiality
    High
    Full-year 2027 CapEx
    increase significantly
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Google Services
    Strong growth in search and subscriptions, with all major verticals contributing to ad growth. YouTube ad growth driven by direct response and brand, particularly strong in the living room.
    Operating margin: 41.8%Search and other advertising revenues: $63.3 billionSearch and other advertising revenues growth: 17%YouTube advertising revenues: $11.1 billionYouTube advertising revenues growth: 13%Network advertising revenues: $7.3 billionNetwork advertising revenues growth: -1%Subscription, Platforms and Devices revenues: $12.9 billionSubscription, Platforms and Devices revenues growth: 15%
    		$94.5 billion15%—$39.5 billion
    Google Cloud
    Outstanding results driven by Enterprise AI products and services, with GCP growing faster than Cloud overall. Core GCP, AI solutions, and AI infrastructure were key drivers. Began recognizing revenue from TPU system sales in Q2.
    Operating margin: 35.6%Cloud backlog: $514 billionCloud backlog sequential increase: >$50 billion
    		$24.8 billion82%—$8.8 billion
    Other Bets
    Continued expansion of Waymo's business and investments in key other bets.
    		$382 million——-$1.8 billion

    Operational metrics

    52
    Consolidated revenue
    $119.8 billionup 24%
    Q2 FY26

    Alphabet revenue grew 24% year-over-year (23% in constant currency).

    Total cost of revenues
    $45.9 billionup 18%
    Q2 FY26
    Traffic acquisition costs
    $16.2 billionup 10%
    Q2 FY26
    Other cost of revenues
    $29.8 billionup 22%
    Q2 FY26
    Total operating expenses
    $33.1 billionup 27%
    Q2 FY26
    Operating income
    $40.8 billionincreased 30%
    Q2 FY26
    Operating margin
    34%
    Q2 FY26
    Other income and expenses
    $98 billionsubstantial increase from the prior year
    Q2 FY26
    Cash and marketable securities
    $242.5 billion
    Q2 FY26
    Long-term debt
    $98.2 billion
    Q2 FY26
    Quarterly cash dividend
    $0.22
    Q2 FY26
    Alphabet level activities operating loss
    -$5.8 billion
    Q2 FY26
    Gemini app monthly active users
    950 million
    Q2 FY26
    Gemma family open models downloads
    900 million
    Q2 FY26
    Antigravity weekly active users
    2.4 million
    Q2 FY26

    agentic development platform

    AI Mode monthly active users
    1 billion
    Q2 FY26

    AI-powered features are driving increased search usage

    AI features in Search clicks to websites
    billions
    weekly
    AI Mode response cost
    lowest level since launch
    Q2 FY26
    YouTube FIFA World Cup 2026 unique viewers
    1.7 billion
    FIFA World Cup 2026

    most viewed World Cup in YouTube history

    Ask YouTube engaged users
    140 million
    June 2026
    Cloud customer acquisition velocity
    more than doublingyear-over-year
    Q2 FY26
    Cloud existing customer commitment exceedance
    more than 50%acceleration over last quarter
    Q2 FY26

    deepening relationships with existing customers who are expanding their usage

    Google Cloud Marketplace transaction growth
    over 7xyear-over-year
    Q2 FY26
    Agent development kit total downloads
    nearly 70 million
    Q2 FY26

    framework for building and deploying enterprise AI agents

    Fortune 100 companies using Gemini Enterprise
    nearly 90%
    Q2 FY26
    Cloud customers processing over 1 trillion tokens
    nearly 500
    last year
    Enterprises consuming over 100 billion tokens
    more than 2,000
    last 12 months
    Fortune 100 companies using Google Cloud security
    90%
    Q2 FY26
    Wiz customers using AI-powered security features
    nearly 90%
    Q2 FY26
    AI workloads scanned and protected by security platform
    more than 45%quarter-over-quarter increase
    Q2 FY26
    Axion CPU performance per dollar
    30% bettercompared to peer offerings
    Q2 FY26
    Waymo Ojai vehicle introduction
    —
    Q2 FY26

    introduced to public riders

    Wing home deliveries
    1 million
    cumulative

    safely completed

    Isomorphic Labs funding raised
    $2 billion
    Q2 FY26
    AI Max advertisers adopted
    0.5 million
    Q2 FY26

    core building block for advertisers to fully participate in new AI experiences

    AI-powered campaigns conversion improvement
    15% moreaverage
    Q2 FY26

    those who adopt our AI-powered campaigns like AI Max or PMax

    AAA Auto Club Enterprises conversion volume improvement
    17%
    Q2 FY26
    AAA Auto Club Enterprises cost per lead decrease
    11%
    Q2 FY26
    SMB customers using AI for creatives
    over half
    Q2 FY26
    Sales team using Gemini-assisted tools
    83%
    weekly
    Ads customer support queries autonomously addressed by Gemini
    75%
    Q2 FY26
    SMB reach expansion by agentic solutions
    hundreds of thousands
    year-to-date
    Debt portfolio
    about $100 billionup from about $16 billion a year ago
    Q2 FY26
    Cloud backlog revenue recognition
    just over 50%
    next 24 months
    TPU system sales revenue recognition
    relatively small portion
    FY26
    CapEx mix
    60% servers / 40% data centers and networking equipment
    Q2 FY26
    Developers building with models
    more than 9 million
    each month
    Model APIs token processing
    22 billionup from 16 billion just a quarter ago
    Q2 FY26
    Chrome team delivery acceleration
    8 times
    Q2 FY26
    Shopping ads relevance improvement
    20%
    Q2 FY26
    Arc'teryx Demand Gen return on ad spend
    70% bettercompared to other paid channels
    Q2 FY26
    YouTube subscription business growth
    growing faster than ads
    Q2 FY26

    Industry KPIs

    6
    MetricValueDetails
    Family dap dau950 millionusers
    CAPEX compute commitments$44.9 billionUSD
    Advertising revenue by segment$81.7 billionUSD
    Share buyback capital returned—
    Ai feature adoption monetizationnearly 90%%
    Custom silicon ai infrastructure30% better%

    Product announcements

    12
    ProductTypeDetails
    Gemini 3.6 Flash and 3.5 Flash-Litelaunch
    Gemini 3.5 Flash Cyberlaunch
    Omnilaunch
    Gemma 4 modelslaunch
    Antigravitylaunch
    Gemini Sparklaunch
    Ask YouTubelaunch
    Google AI Threat Defenselaunch
    Axion CPUlaunch
    Universal Commerce Protocol (UCP)launch
    Universal Cardlaunch
    Buy with Google Paylaunch

    Deals & partnerships

    24
    Booking Holdingsexpanded a multiyear cloud commitment and is partnering closely to advance our AI-powered ad formatsmultiyear

    Expanded multiyear cloud commitment, partnering to advance AI-powered ad formats, deploying Google's AI technology for agentic dining reservations on OpenTable.

    PepsiCousing Gemini Enterprise for AI and analytics solutions

    Customer for AI and analytics solutions.

    Intelusing Gemini Enterprise to streamline core processes

    Customer to streamline core processes.

    HSBCusing Gemini Enterprise for wealth management

    Customer for wealth management.

    Bell Canadausing Gemini Enterprise for customer engagement

    Customer for customer engagement.

    Macy'susing Gemini Enterprise for commerce experiences

    Customer for commerce experiences.

    SIGNAL IDUNAusing Gemini Enterprise for knowledge management

    Customer for knowledge management.

    Wizintegrates threat intelligence, cyber response prioritization with Wiz

    AI-powered security platform integrates threat intelligence, cyber response prioritization with Wiz.

    Ineffable Intelligenceusing AI infrastructure offerings

    Leading lab using AI infrastructure offerings.

    Kakaousing AI infrastructure offerings

    Next-generation AI builder using AI infrastructure offerings.

    Deutsche Börse Groupusing AI infrastructure offerings

    Financial services customer using AI infrastructure offerings.

    Pfizerusing AI infrastructure offerings

    Pharmaceutical company using AI infrastructure offerings.

    Rocheusing AI infrastructure offerings

    Pharmaceutical company using AI infrastructure offerings.

    World Labsusing AI infrastructure offerings

    Robotics and spatial intelligence company using AI infrastructure offerings.

    WalmartWing partnership for home deliveries

    Wing continues to grow presence through partnerships.

    DoorDashWing partnership for home deliveries

    Wing continues to grow presence through partnerships.

    Papa JohnsWing partnership for home deliveries

    Wing continues to grow presence through partnerships.

    Targetadopting Universal Commerce Protocol (UCP)

    Merchants rapidly adopting UCP.

    Steve Maddenadopting Universal Commerce Protocol (UCP)

    Merchants rapidly adopting UCP.

    IHG Hotels and ResortsDirect Offers gaining momentum, surfacing special offers during trip planning

    Partners like IHG Hotels and Resorts, soon surfacing special offers during trip planning.

    Morgan Stanleyusing security tools to protect critical infrastructure

    Financial services organization using security tools.

    TELUSusing security tools to protect critical infrastructure

    Telecommunication provider using security tools.

    Texas Children'susing security tools to protect critical infrastructure

    Health care organization using security tools.

    Atlassianusing security tools to protect critical infrastructure

    Software company using security tools.

    Risks & headwinds

    6
    Supply constraints for AI infrastructureongoing

    demand still outpaces investment

    Mitigation: expanding use of third-party capacity in Q3 as a bridging strategy; building up more internal capacity; full stack approach to drive operational and technological efficiencies

    FX headwind to consolidated revenueQ3 FY26

    slight FX headwind

    Modest margin pressure in Google Cloudnear term

    modest margin pressure

    Mitigation: utilizing third-party capacity to keep growing customer base and capture greater overall value

    Increased CapEx and related expensesfull year 2026 and significantly in 2027

    CapEx guidance range to $195 billion to $205 billion, up from $180 billion to $190 billion; significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expense and related data center operations costs such as energy

    Mitigation: enables us to capitalize on the AI opportunity and continue to drive attractive returns

    Free cash flow will remain under pressureongoing

    negative free cash flow of $5.9 billion in the second quarter

    Mitigation: driven by our investments in technical infrastructure which enables us to capitalize on the AI opportunity and continue to drive attractive returns

    Wiz integration creates some headwindnear term in 2026

    some headwind

    What to watch in Q3 FY26

    5

    Cloud Operating Margin

    Q3 FY26
    Current35.6%
    TargetMonitor impact of third-party capacity on margin

    Why it matters

    Management guided to modest margin pressure in Q3 due to increased use of third-party capacity to address supply constraints, which could impact profitability.

    However, it will create modest margin pressure in the near term as we utilize this capacity.

    Q&A highlights

    5

    How has the view on GenAI ROIC changed, and how do supply constraints impact CapEx planning for 2027?

    Sundar expressed increased bullishness on GenAI ROIC, citing extraordinary opportunities across consumer and enterprise. Anat stated that investments are made as long as attractive returns are seen, taking a multi-year view, and demand continues to outpace investment despite significant capacity increases.

    “So I would say from an ROIC standpoint, I think we are taking a full stack approach. We are seeing momentum across consumers and enterprises and developers and so on. So it feels like, if anything, over the past year, we've gotten more bullish on the opportunities ahead.”

    asked by Brian Nowak · answered by Sundar Pichai

    2 min read6 chapters

    Detailed Narrative

    01

    AI Innovation and Product Momentum

    Sundar Pichai highlighted significant AI advancements, including new Gemini 3.6 Flash and 3.5 Flash-Lite models, designed for cost-effectiveness and efficiency, and the ambitious pretraining run for Gemini 4. The Gemini app has reached 950 million MAUs, tripling DAUs in the last year, while Omni, a video creation tool, saw a 40% increase in DAUs. Google's open models, Gemma, have been downloaded over 900 million times, with the latest Gemma 4 models downloaded over 300 million times since April.

    02

    Search and YouTube AI Integration

    AI Overviews and AI Mode are now integrated into a seamless search experience, driving an incremental increase in search queries and surpassing 1 billion monthly active users. AI features in Search are sending billions of clicks to websites weekly, with the cost of AI mode responses reduced to its lowest level since launch. YouTube is also leveraging conversational AI with "Ask YouTube," which engaged over 140 million users in June 2026, allowing complex questions about videos.

    03

    Google Cloud's Enterprise AI Leadership

    Google Cloud's 82% revenue growth is attributed to its integrated AI portfolio, including Gemini Enterprise, which is used by nearly 90% of Fortune 100 companies. The agent development kit, a framework for enterprise AI agents, reached nearly 70 million total downloads. Cloud's product differentiation is driving new customer wins, deeper relationships with existing customers, and 7x growth in transactions on the Google Cloud Marketplace, with nearly 500 cloud customers processing over 1 trillion tokens in the last year.

    04

    Strategic Infrastructure Investments

    Alphabet is making substantial investments in technical infrastructure, with Q2 CapEx at $44.9 billion, primarily for AI support (60% servers, 40% data centers/networking). The company offers a broad range of accelerators, including NVIDIA and its own TPUs, and unique offerings like the Virgo Network for large-scale AI workloads and the agent-optimized Axion CPU, providing 30% better performance per dollar. These investments are critical to meeting strong demand and capitalizing on the AI opportunity.

    05

    Capital Structure and Financial Discipline

    The company reported strong operating cash flow of $39.1 billion in Q2 and ended the quarter with $242.5 billion in cash and marketable securities. Management emphasized a resilient balance sheet, utilizing cash from operations, expanded debt to $100 billion, and recent equity raises to fund investments while maintaining financial health. The board declared a quarterly cash dividend of $0.22 per share, payable in September, reflecting a balanced approach to capital allocation.

    06

    Other Bets Progress

    Waymo introduced its newest vehicle, Ojai, to public riders, powered by the sixth-generation Waymo Driver, with more riders expected in coming months. Wing safely completed over 1 million home deliveries, expanding partnerships with major retailers like Walmart, DoorDash, and Papa Johns. Isomorphic Labs raised over $2 billion to advance its AI drug design engine and drug candidate pipeline, showcasing continued progress in Alphabet's long-term strategic investments.

    AI-generated summary of the company’s earnings call. Not investment advice.