Google's cloud business revenue increased by more than 80% in the second quarter: AI demand is strong and full-year capital expenditures are expected to exceed US$200 billion
Technology giant Google's second-quarter performance was solid, but rising capital expenditure expectations have caused concerns. After the U.S. stock market closed on July 22, local time, Alphabet, Google’s parent company, released its financial report for the second quarter of 2026 as of June 30.
Technology giant Google's second-quarter performance was solid, but rising capital expenditure expectations have caused concerns. After the U.S. stock market closed on July 22, local time, Alphabet, Google’s parent company, released its financial report for the second quarter of 2026 as of June 30. The financial report shows that Alphabet achieved revenue of US$119.796 billion in the second quarter, a year-on-year increase of 24%, higher than market expectations of US$116.9 billion; non-GAAP net profit was US$112.107 billion, a year-on-year increase of 298%; diluted earnings per share (EPS) was US$9.11, significantly higher than market expectations of US$2.89. Google's investment portfolio has been a source of earnings growth for the company, with holdings in companies such as Anthropic and SpaceX. Google's investment income reached $99 billion in the quarter, driving the company's net profit to soar. Google CEO Sundar Pichai said: "Our investments in AI are reshaping the infinite possibilities of the company's businesses. The second quarter performance was outstanding, with Alphabet's revenue growing 24% year-on-year. Driven by strong demand for AI infrastructure and AI solutions, Google Cloud revenue growth further accelerated to 82%. It is very exciting to see Gemini Enterprise being widely adopted, with nearly 90% of the Fortune 100 companies using the service." Pichai said popular AI features are driving growth in search queries. The Gemini model currently processes 22 billion API Tokens (word elements) per minute, and the number of monthly active users of Gemini App has reached 950 million. Summary of Google's second quarter results. Source: Financial report On the 22nd, Google (Nasdaq: GOOGL) stock price fell 1.46% to close at US$342.09 per share, with a total market value of US$4.16 trillion. After the financial report was released, Google's stock price fell after a brief rise, falling by more than 3%. Annual capital expenditure may exceed US$200 billion, and cloud business revenue will increase by 82% In terms of capital expenditures, Google has continued to raise its 2026 capital expenditure forecast to a range of US$195 billion to US$205 billion, compared with the previous estimate of US$180 billion to US$190 billion. The company's second-quarter capital expenditures reached $44.92 billion, higher than market expectations of $44.15 billion. Alphabet Chief Financial Officer Anat Ashkenazi said on the earnings call that capital expenditures this quarter were mainly used for AI technology infrastructure construction. Spending will also increase "significantly" in 2027 as the company builds data centers and acquires other computing resources to support its AI projects and models. "We're still in a supply-demand environment right now," Ashkenazy said. "I think we've emphasized this for several quarters in a row, whether it's from external cloud customers or across our own businesses, we're seeing extremely strong demand." As spending on property and equipment exceeded cash flow from operating activities, Google's free cash flow for the quarter was negative $5.9 billion, the first time in the company's history that it has experienced negative cash flow. Although Google's overall performance last quarter was impressive, such a "cash burn" rate has once again aggravated market concerns. Investing.com senior analyst Thomas Monteiro said: "Further increases in capital expenditures do not bode well for Alphabet. Coupled with an rising interest rate environment and ongoing supply and demand bottlenecks in AI infrastructure, belief that the company can rely on its own cash flow to maintain funding needs may be starting to shake." Google Cloud is responsible for most of the company's AI services and products. Google said its cloud business backlog (RPO) before revenue has increased to $514 billion, up from $460 billion in the previous quarter. Google said the majority of its cloud backlog involves typical contracts with "various types of customers," and that it expects to recognize more than half of that revenue within the next 24 months.
Gemini 3.5 Pro is already in testing, and the company is investing heavily in Gemini 4 During the reporting period, Google continued to expand its Gemini series of products and launched new models such as Gemini 3.6 Flash. However, the delayed release of the Gemini 3.5 Pro model has raised concerns about the model's ability to compete. Pichai said on the conference call that Gemini 3.5 Pro is being tested, and he is encouraged by the progress of the company's next-generation model, Gemini 4, calling it a larger, cutting-edge model that Google is prioritizing in training: "We hope that when Gemini 4 comes out, it can reach the cutting-edge level, so we are investing a lot of computing resources and energy in this direction." Nate Elliott, chief analyst at Emarketer, said: "Gemini is currently only one step away from becoming Google's third consumer AI product with 1 billion users. The previous two products were AI Overviews and AI Mode. On the enterprise side, AI demand is driving explosive growth in the cloud business." Brian Mulberry, chief market strategist at Zacks Investment Management, said: "YouTube is in a slightly better position than in the past, breaking several consecutive quarters of losses. But in this environment, it should perform better." In addition, non-core business units (Other Bets), including the life sciences unit Verily and the autonomous driving unit Waymo, had revenue of US$382 million in the second quarter, compared with US$373 million in the same period last year.
Gemini 3.5 Pro is already in testing, and the company is investing heavily in Gemini 4 During the reporting period, Google continued to expand its Gemini series of products and launched new models such as Gemini 3.6 Flash. However, the delayed release of the Gemini 3.5 Pro model has raised concerns about the model's ability to compete. Pichai said on the conference call that Gemini 3.5 Pro is being tested, and he is encouraged by the progress of the company's next-generation model, Gemini 4, calling it a larger, cutting-edge model that Google is prioritizing in training: "We hope that when Gemini 4 comes out, it can reach the cutting-edge level, so we are investing a lot of computing resources and energy in this direction." Nate Elliott, chief analyst at Emarketer, said: "Gemini is currently only one step away from becoming Google's third consumer AI product with 1 billion users. The previous two products were AI Overviews and AI Mode. On the enterprise side, AI demand is driving explosive growth in the cloud business." Brian Mulberry, chief market strategist at Zacks Investment Management, said: "YouTube is in a slightly better position than in the past, breaking several consecutive quarters of losses. But in this environment, it should perform better." In addition, non-core business units (Other Bets), including the life sciences unit Verily and the autonomous driving unit Waymo, had revenue of US$382 million in the second quarter, compared with US$373 million in the same period last year.