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DeepMind's new boss is set to face intense pressure to close the AI performance gap with OpenAI and Anthropic.

OpenAI and Anthropic have released new systems in recent months that have been both hailed for and prompted concern over their advanced capabilities. On the other hand, Google, which acquired DeepMind in 2014, hasn't unveiled a frontier model since early 2026.

Koray Kavukcuoglu, who was previously the AI unit's CTO and parent company Google's chief AI architect, is inheriting a race to catch up to OpenAI and Anthropic at the frontier — building the industry's most advanced models. He's stepping up to become SVP, replacing DeepMind cofounder and CEO Demis Hassabis, who becomes the organization's chair.

"The goal will undoubtedly be to close the gaps with Anthropic and OpenAI in some areas," Ben Wood, chief analyst at CCS Insight, told CNBC.

Kavukcuoglu's promotion "feels like a move that is designed to adjust the focus of Google's efforts away from academic projects and more toward a stronger focus on improving frontier performance and improving the toolset for developers," Wood added.

Competing at the frontierGoogle has lagged behind OpenAI, which set the pace after releasing ChatGPT to the public in 2022. That shifted in November 2025 when Google released Gemini 3.

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Analysts said the model "moved the frontier forward", with capabilities that "far exceed[ed] what we've typically come to expect from this generation of frontier models."

But 2026 has seen OpenAI and Claude maker Anthropic pull ahead with new releases. Anthropic's Mythos model broke new ground, and OpenAI's GPT-5.6 was similarly lauded.

Following Gemini 3.1 Pro in February, Google's releases this year haven't challenged at the frontier. It assembled an internal team called "Code Strike" to bolster coding capabilities, crucial to the drive to develop artificial general intelligence (AGI).

Google fell behind Anthropic and OpenAI "because its focus was much more on monetizable areas such as Search, and multi-modal and it lost out on the first clear killer use case, which is coding," Malik Ahmed Khan, senior equity analyst at Morningstar, told CNBC. Coding is an area where those two companies are "miles ahead" of Google, he added.

A Google spokesperson told CNBC it would be inaccurate to say the company was distracted from its mission of solving "intelligence" before solving "everything else." They said the path to AGI will involve pushing on fronts including agents, coding, robotics and world models, and pointed to DeepMind releases across robotics, video and computer use, as well as public policy work and research.

DeepMind under KavukcuogluKavukcuoglu is part of DeepMind's old guard, having joined in 2012 before the Google acquisition, and will look to bring renewed focus on challenging Anthropic and OpenAI at the frontier, amid several high-profile departures.

Reporting directly to Google CEO Sundar Pichai, Kavukcuoglu will oversee Gemini model development, Frontier AI research, and the Gemini app and developer teams, Pichai said in a statement.

Kavukcuoglu's appointment will bring "more focus to GDM, with LLM [large language model] improvements being the clear route forward," Morningstar's Khan said. "We think Google is likely better positioned in the LLM race with these changes than it was without them," he added.

"Demis has been much more interested in building AGI that was beyond LLMs," Khan said.

Hassabis' tenure leading DeepMind "saw a clear focus on other areas such as multi-modal, such as world models, as well as his work in health, for example with Isomorphic Labs," he added.

Kavukcuoglu had been taking on broader responsibilities from Hassabis over the past year, including directing model development and presenting major Gemini releases, a person close to the DeepMind team told CNBC last week.

Kavukcuoglu's promotion "shows that Google is prioritizing execution over deep research," Ray Wang, principal analyst at Constellation Research, told CNBC. "Expect faster releases, more experimentation and an emphasis on developing to a product roadmap."

Alphabet shares sank in July after Bloomberg reported that the company had delayed the release of Gemini 3.5 Pro to try and improve performance in areas like coding.

"The first step [for Kavukcuoglu] would be to ship Gemini 3.5 Pro if possible, and then prove it wasn't a one-off by maintaining a predictable release cadence," said Nick Patience, AI lead at the Futurum Group. Beyond shipping a model that competes at the frontier, Kavukcuoglu "needs to rebuild the coding and pretraining expertise that walked out the door," he told CNBC.

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DeepMind was based in London before its acquisition and Hassabis remained in the city as CEO when it became a division within Google. DeepMind's continued presence there spurred the U.K. AI ecosystem.

Under his previous role, Kavukcuoglu moved from London to Google's headquarters in Mountain View, California.

"Google is quietly consolidating its AI leadership out of London," Patience said. A Google spokesperson told CNBC it remained committed to its presence in the UK capital.

Google's AI playAlphabet shares dropped on Thursday when the AI reshuffle was announced, though the stock has risen around 76% in the last 12 months.

Alphabet CEO Pichai said on last month's earnings call that nearly 90% of Fortune 100 companies are using Gemini Enterprise, stressing the company's ability to sell AI services to cloud customers.

"Although the model is behind and they want to catch up and they take that seriously, the monetization of the model is doing extremely well," Sebastian Mallaby, author of "The Infinity Machine," a biography of Hassabis, told CNBC's "Squawk Box" on Monday. He pointed to Google's AI being deployed across Android phones and Siri and Apple Intelligence on iPhones.

It was wrong to "paint a picture of a general crisis" at the company because of big-name departures, Mallaby added. "It's a big team. It's several thousand people on the Gemini team, if you count everybody. And so we shouldn't over-index on a few famous names."

The breadth of Kavukcuoglu's remit — Gemini model development, the Gemini app and developer teams, and reporting directly to Sundar Pichai — could also boost Google's AI advantage, said Brian Hopkins, VP, emerging tech and principal analyst at Forrester.

"Models, the app, and the developer teams under one executive is how a company organizes a product group rather than a lab," he told CNBC. "This is something that Google knows how to do much better than OpenAI or Anthropic."

— CNBC's MacKenzie Sigalos contributed to this report.

Alphabet (GOOG -3.61%) (GOOGL -3.84%) reported its 2026 second-quarter earnings on July 22, announcing its capital expenditures would be higher than previously anticipated. Instead of an earlier forecast of $180 billion to $190 billion, Alphabet now expects to spend between $195 billion and $205 billion in 2026.

What followed was a drop in the stock price, which wasn't a surprise, given that capital expenditures on building out artificial intelligence (AI) are being more closely scrutinized. But while the stock price slid roughly 7% following the news, Alphabet may still offer a long-term buying opportunity.

Image source: The Motley Fool.

Some Alphabet investors have spending worries On the company's second-quarter earnings call, Alphabet CEO Sundar Pichai shared some impressive stats. Cloud revenue climbed 82% to $24.8 billion from the prior-year period, and its Gemini App now has 950 million monthly active users.

Still, what seemed to worry investors was the increase in capital expenditures. Not only did Alphabet's spending in the second quarter increase 100% year over year to $44.9 billion, but, as mentioned earlier, it also boosted its capital expenditure forecast for the year.

Pichai explained that the raised 2026 capital expenditure forecast is a necessary investment to meet overwhelming customer demand for AI infrastructure and cloud capacity, which continues to exceed available supply. Google Cloud's "momentum is driven by our integrated AI portfolio consisting of chips, models, data, security, and agent platforms, all designed to work together," Pichai noted.

Finding ways to fund that is also creating worry, as Alphabet announced an $80 billion equity raise in June.

Equity raises, in turn, lead to concerns about shareholder dilution. Also, Alphabet's spending has put pressure on free cash flow. It was negative in the second quarter, the first time it has been negative since 2004. Alphabet has also recently returned to raising more money, selling $25 billion in investment-grade bonds on Aug. 6.

That said, to Alphabet's credit, it also has its share of supporters who argue that spending is necessary to remain a leader in AI, which could be a $1.4 trillion global market by 2032, according to data from Statista.

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The Alphabet believers Berkshire Hathaway has let its investment do the talking about its belief in Alphabet. The conglomerate run by CEO Greg Abel has made several investments in Alphabet, with the Berkshire portfolio now holding over $30 billion worth of Class A (voting) and Class C (non-voting) shares.

In addition, even as Alphabet continues to raise money, investors still want a piece of whatever the company offers. For example, its most recent $25 billion investment-grade bond sale attracted $115 billion of peak demand, according to Bloomberg. It also priced $20 billion in bonds in February, attracting $103 billion worth of demand.

The bottom line is that any time concerns over spending are raised, it's likely to continue to weigh on the stock price. But Alphabet can still be a long-term winner and a leader in the AI market.

Getty Images; Alyssa Powell/BI Help! An AI overview says my business is terrible They worked tirelessly to build their company's reputation. Then came Google's new AI summary.

Getty Images; Alyssa Powell/BI

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2026-08-11T08:22:01.237Z

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Damian Mansell was stunned to see what Google was saying about his nascent business. When he searched for reviews of The Plastics Shed — the online building-plastics supplier he incorporated at the start of 2025 — the platform's AI overview said customer feedback was "overwhelmingly negative." It listed complaints about delayed deliveries, lying staff, and damaged products. While the company had some positive feedback, the summary said, its poor customer service was a "significant recurring issue." The good news: The reviews weren't actually about Mansell's company. They appeared to be for competitors and companies that sold actual plastic sheds. The bad news: He had no idea what to do about it.

Mansell, who lives in the UK, says. "I can see how that happens, but why should it happen with Google?" Mansell, who lives in the UK. "I mean, obviously, the forefront of AI technology."

To make matters worse, Mansell was paying Google about £700 a month to advertise, while the summaries warned people away. Following advice he found on online forums, he repeatedly submitted feedback to Google that the abstract was wrong. After a couple of weeks, it started to improve. AI has been an invaluable tool for him to build out his business, so he doesn't want to malign the tech in general, but he wishes there were more accountability when things go awry.

"AI gives the common man the knowledge, but it can also ruin the common man," he says.

Google's AI Overviews are rapidly becoming consumers' first impression of businesses. Instead of scanning reviews and websites, many users see a single synopsis that purports to blend information from across the internet into a comprehensive digest. When those summaries are inaccurate, misleading, or jumbled, business owners say they can cause serious reputational damage and financial losses, and there's often little recourse.

Mansell still wonders how much business the issue cost him. He's tried to get Google to refund some of his ad dollars, but he hasn't had any luck, despite his best efforts.

"I'm like a dog with a bone," he says. "But I met my match with Google."

Internet search has changed drastically in the last few years: Instead of a list of links, Google often provides a single response that's supposed to summarize the constellation of online information. These overviews look right and sound confident, but they draw on a litany of sources with varying levels of reliability. They can even spit out information that is flat-out wrong. (Like recommending people make glue pizza.) Misinformation on the internet isn't new, but the clean, concise, AI-concocted package is.

"With the traditional search engine, the user sees multiple things. So if one of them has something wrong, chances are something else would counterbalance it," says Chirag Shah, a professor at the University of Washington's Information School. That's now gone, and with AI overviews, you're getting "The Answer," which may or may not be correct.

I look at the AI overview, I wouldn't call me.For business owners, the consequences can be more than a mild annoyance or temporary confusion. These AI summaries are becoming their digital storefronts. Across the internet, you can find entrepreneurs and managers grumbling that AI summaries mix them up with other companies, surface complaints that are directed at someone else, or dole out false facts.

Earlier this year, Betty Whitney started noticing that Google's overviews were conflating her company — NW Select Property Management in Idaho — with similarly named businesses. The top panel seemed to be merging her firm with one in the region that closed years ago and mixing her reviews up with property managers in other states.

"If I'm a customer, and I'm looking for a property management company, and I look at the AI overview, I wouldn't call me," she says.

Whitney has spent months trying to amend the situation. Like Mansell, she's used Google's feedback mechanism to give overviews a "thumbs down" when they're wrong, and she's made some adjustments to her website to try to feed the AI crawlers more accurate data. After bringing her problem to a Google support forum, she got in touch with a third-party SEO expert who was able to help her out — sort of. The overview has gotten better, but it still periodically reverts to the mistake-filled version.

Three years after relocating, Philippa Main, a real estate agent in Northern Virginia, still can't completely convince Google that she's no longer in Florida. When she searches her name, most of the information that comes up about her is correct, but then there's a line that confidently states that she's been "servicing the Tampa Bay area since 2014," even though it sits right above her Virginia address. Main's tried everything she could think of to get it adjusted, combing the internet to try to find where the AI is drawing from, emailing Google, and asking friends to report the issue.

"There's so much competition in my industry that if any single thing seems off, someone's just going to call the next person on the list," she says. It's especially frustrating for small businesses, because "we're just trying to do everything that we can to compete with these massive companies who actually do have direct lines to Google or their representatives," she says. "Google just doesn't seem to care."

In a statement, a Google spokesperson told me that its search-related AI experiences are "rooted in our quality ranking systems and are designed to present a range of perspectives" from all over the internet. "AI Overviews are responsive to people's specific queries; for example, if someone specifically searches for complaints about a business, the generated response will likely show relevant information from sources across the web," they said.

It's no secret that AI is not always a bastion of truth — almost everyone who's used the technology has experienced a response from it that's highly off-base at some point. As the New York Times wrote in April, Google processes over five trillion searches a year, and even if its overviews are right nine times out of 10, that still means half a trillion wrongs. Google acknowledges that while the overwhelming majority of its overviews are accurate, there can be cases where they miss context or misinterpret content. A Google spokesperson said the study the Times cited has "serious holes."

Google's summaries synthesize information from many places — a big source is, obviously, the company website, but it also gobbles up Reddit posts, 10-year-old blogs, and Yelp reviews. The platform provides links that are supposed to back up its claims, but those links don't always support the output. AI has also been known to hallucinate, meaning it invents plausible-sounding things from thin air.

"There's so much room for error," says Lily Ray, an SEO and AI search consultant and the founder of Algorythmic, a consultancy.

The overviews are delivered with such assurance that people don't realize they're looking at an extracted or generated answer that may be incomplete or incorrect. Instead of clicking on five links to compare information or just spending a few minutes confirming, they skim the automated summary and call it a day. The AI says this roofing company's reviews are terrible? Onto the next one! Rarely do people dig in to check if it's pulling complaints for a business in another state.

There's so much room for error.Search industry professionals say this is a new frontier for businesses. They no longer have to focus so heavily on search rankings but must instead manage the AI's interpretation of their reputations. It's not about chasing clicks —it's about making sure AI knows you exist and is nice and correct about you. Ray says it's the "biggest change to search" she's seen in her 16-year career.

This brave new world presents all sorts of nuances and complications. Google likes to cite Reddit a lot, which "can go awry very fast," Ray says. Reddit has a lot of good information, but it can also be a little wild. The same goes for YouTube comments, which the AI also seems to like. Some brands suffer from an information void: there's not a lot of content out there about them, so AI tries to fill in the gaps or comes up with bad answers. Or, they've got a name problem where they're too close to another entity, and the model can't tell who's who. There may be bad actors who intentionally leave false or negative information about businesses online for AI summaries to pick up. Even simple facts, such as store hours or phone numbers, require a concerted effort across the entire internet to keep straight. "There's so much maintenance work that has to go into keeping a brand's content and information accurate and up to date," Ray says.

Michael King, the founder and CEO of iPullRank, a digital marketing agency, tells me he focuses on citation accuracy and on gaining some influence over AI outputs. "The way these systems work is they're basically doing a bunch of searches in the background, and then they're feeding content to the large language model," King says. Businesses need to create more "surface area" — meaning publishing more content and targeting more keywords — to help AI find the right answer. He encourages clients to position themselves as the experts on their own brands.

"You've got to think of it as more like a reputation management campaign than your classic SEO campaign," King says. "It's just far more multidimensional."

Ben Fisher does this for a living and still runs into problems. He noticed that Google's AI summary was warning that his company — Steady Demand, a SEO and social media consultancy for small businesses — was a scam. After doing some digging, he realized it was referring to an old Reddit thread about a similarly named app and had to take some time out to "train" Google to know the difference.

"The big problem is there's nobody to contact. The other big problem is you search once, and you're done," Fisher says. Large language models don't produce the same results every time, even for the same questions, so people don't realize one result might not match the next month, week, or minute. "It's still a situation where you should be monitoring things on a regular basis," he says. "Otherwise, you're just not going to know why you're not getting calls."

This is a difficult issue to tackle from a technological, entrepreneurial, and regulatory point of view. LLMs are improving, but they're never going to be perfect. Business owners can do their best to keep an eye on how they're showing up in search results, but they've also got 9,000 other things to do.

Reasonable minds — and different countries and legal systems — can disagree about how responsible Google should be when the robot screws up. In Canada, a musician has filed a $1.5 million lawsuit against Google claiming that its AI summary falsely identified him as a sex offender. A court in Germany recently made a preliminary ruling that Google is liable for false statements made in its AI overviews. A Google spokesperson said that the German case focuses on "specific and narrow errors," not the way overviews display content, and that the company disagrees with the ruling and plans to appeal. Shah says that in the US, we have "very little consumer protection" for these types of issues.

"I don't think lawmakers even fully understand the technology enough and the implications to be able to do anything," he says.

In the meantime, business owners are left white-knuckling it, hoping that the mysterious technology at the heart of those AI summaries looks kindly upon them. That's the case with Mansell, who's proud to say that Google's overview of the Plastics Shed is now "fantastic", just like many of his actual reviews.

"It does worry me with regard to what can be said about you without any recourse," he says.

Despite his frustrations with the summary and failed attempts to get a refund, Mansell still pays to advertise with Google — otherwise, people don't click through to his website. "I just gave up," he says. "It was just an absolute pointless exercise."

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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Emily Stewart You're currently following this author! Want to unfollow? Unsubscribe via the link in your email.

Emily Stewart is a senior correspondent on Business Insider’s Discourse team. She focuses on consumerism, culture, and the economy, among other topics. Some of her biggest stories have explored Red Lobster’s demise, middle-class shoplifting, convenience stores’ struggles, the rise of illicit drugs as work performance-enhancers, and generational finance trends, including Gen Z’s love for AmEx and the impending avalanche of baby boomers’ stuff. She also writes regularly about sports betting, the alcohol industry, work, millennials, and economic trends. Emily appears regularly on nationally syndicated radio shows and podcasts, including Marketplace, The Weekend Dive, and Today, Explained. She has guest hosted C-SPAN’s “After Words” and moderated multiple panels on economic policy and workplace dynamics.Before joining Business Insider, Emily was at Vox, where she covered business and the economy and wrote a newsletter, “The Big Squeeze,” about how people experience the forces of the economy and capitalism day to day. Prior to that, she worked at TheStreet.

On a Bloomberg Businessweek segment that aired August 7, 2026, Ed Zitron, CEO of EZ Primary Research and one of the more vocal AI skeptics in financial media, made a claim that reframes how investors should think about hyperscaler cloud growth. Citing UBS estimates that 27% of Google Cloud’s revenue this year comes from OpenAI and Anthropic, rising to 48% next year, totaling over $124 billion, Zitron argued that the AI boom powering Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) is dangerously narrow.

Zitron’s thesis: what looks like broad, diversified enterprise demand for AI compute is, in his view, circular financing concentrated in two unprofitable private companies that, as he put it, “do not pay their bills out of existing cash flow.”

The Concentration Numbers Across the Three Hyperscalers Google Cloud is the epicenter of the argument. The segment posted $24.768 billion in Q2 2026 revenue, growing 82% year-over-year, its fifth consecutive quarter of acceleration. Alphabet spent $44.924 billion on capex in the quarter, more than double the prior year, and raised roughly $70 billion through combined equity and debt financing, per its Q2 8-K filing. Free cash flow turned negative at -$5.855 billion, and the buyback was suspended.

Zitron’s argument is that this spending is being underwritten by a customer base most investors misunderstand. At AWS, Barclays puts exposure to those same two customers at 13% this year, rising to 18% next year. At Microsoft, Zitron reported that 69% of Microsoft Intelligent Cloud’s year-over-year growth in 2025 came from OpenAI alone, and without it that segment would have grown just 8% year-over-year. He also cited reporting from The Information that 89% of the largest AI companies’ revenue comes from OpenAI and Anthropic.

For context, Microsoft’s Intelligent Cloud segment produced $39.306 billion in Q4 FY2026 revenue, up 32%, with Azure growth of 43%. AWS delivered $42.232 billion in Q2 2026, up 37% year-over-year, described by Andy Jassy as its fastest growth in 18 quarters.

The Sustainability Problem Zitron then attacked the demand side. He cited OpenAI losses of $20.9 billion in 2025 and flagged that over $800 million of OpenAI’s revenue came from SoftBank’s “Crystal Intelligence” program, of which he claims he can find “no evidence of actually anything happening.”

Scaling that concern industry-wide, he referenced Sightline Climate projections that data centers will require over $1.6 trillion in annual revenue to sustain. Two customers cannot backfill that hole, Zitron argued, “especially when Anthropic and OpenAI, well, they can’t afford anything.”

The Enron Parallel and IPO Delay The rhetorical peak of Zitron’s segment was a comparison to Enron. With OpenAI’s IPO reportedly delayed to 2027, which he called “lethal for a number of people,” Zitron argued executives at the hyperscalers have “a fiduciary responsibility” to shareholders that may be getting overlooked amid the AI infrastructure race.

Grassroots discussion mirrors the concern. A Reddit thread titled “Either hyperscalers are dumb or someone else is” drew 4,024 upvotes and 1,503 comments, and a separate post flagged Alphabet’s first quarter of negative free cash flow in Q2 2026.

Context for Investors Markets have not yet punished the trade. GOOGL is up 80.8% over the past year, AMZN up 23.01%, and MSFT down 3.23% over the same one-year window. Analysts remain broadly constructive, with GOOGL carrying 58 Buy ratings and an average target of $428.04.

The bull case, that Gemini, Copilot, and Bedrock are seeding genuine enterprise demand well beyond two labs, is real and reflected in Microsoft’s commercial RPO of $678 billion, up 84% year-over-year, and over 30 million paid Microsoft 365 Copilot seats. Zitron’s warning is a contrarian argument, clearly his opinion, and worth weighing against those data points rather than treating as a verdict. Investors watching hyperscaler capex through 2027 will want to track customer disclosure closely.

Contact [email protected] for any questions or corrections.

Alphabet (NASDAQ: GOOG | GOOG Price Prediction) and Meta Platforms (NASDAQ: META) both dropped Q2 2026 results in late July, with sharply diverging results.

Google leaned on Cloud and Gemini adoption to power a clean beat. Meta grew ad revenue at a healthy clip but watched costs blow past guidance, snapping a long earnings streak and rattling investors.

Cloud Carries Google. Costs Bite Meta. Alphabet posted revenue of $119.8 billion, up 24.23% year over year, with Google Cloud accelerating to $24.77 billion and 82% growth.

Sundar Pichai told investors that “nearly 90% of the Fortune 100” now use Gemini Enterprise, while Gemini models process 22 billion API tokens per minute. Search still did the heavy lifting at $63.27 billion, up 17%, and YouTube pulled in 1.7 billion unique viewers for World Cup content. Operating margin expanded to 34%. Clean.

Meta’s top line looked fine on the surface: revenue of $60.8 billion, up 27.96%, ad revenue of $59.36 billion, and impressions up 14% with pricing up 12%. The problem sat below the fold.

EPS came in at $6.18 versus $7.2173 expected, missing expectations by 14.42% and ending a six-quarter beat streak. Total costs jumped 55%, weighed down by $2.40 billion in legal charges and $1.18 billion in severance tied to an 8,000-employee reduction. Operating margin collapsed from 43% to 31%.

Business Driver Alphabet Meta Main growth engine Cloud + Gemini Enterprise AI-priced ad targeting Margin direction Expanding Compressing Q2 capex $44.9 billion $30.1 billion Full Stack vs. Superintelligence Moonshot Alphabet is monetizing AI across a stack it already owns: TPUs, Gemini models, Cloud, Search, YouTube, Workspace. Pichai framed it as a “differentiated, full stack approach“, and the Cloud number backs him up.

Meta is spending to invent something further out. Zuckerberg’s Meta Superintelligence Labs is chasing consumer AI on top of a family of apps that reaches 3.60 billion daily users. He called AI “accelerating our core business today“, but the P&L is doing the paying.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

Both are borrowing heavily. Alphabet raised roughly $70 billion in combined equity and debt and suspended its buyback. Meta guided full-year capex to $130 billion to $145 billion, with expenses raised to $165 billion to $169 billion. Free cash flow tells the story: Alphabet swung to negative $5.86 billion, and Meta’s fell 91.31% to $784 million.

The Next Test Is Whether Capex Pays I want to see three things. For Google, whether Cloud can hold that 82% pace as capacity floods online, and whether Search query growth truly benefits from AI features rather than getting cannibalized.

For Meta, whether the Q3 revenue guide of $61 billion to $64 billion materializes without another cost surprise. The youth-related U.S. trials scheduled for 2026 are a wildcard I do not think retail has priced in.

Why I Lean Google Right Now On the fundamentals, Alphabet looks like the cleaner setup. Cloud is compounding, margins are widening, and shares are up 14.06% in the past week and 96.65% over one year.

Meta is a harder call. The ad engine still works, but shares are down 21.05% over the last year, and Polymarket traders assign only a 44% probability that META revisits $640 in August.

If you like turnarounds with defined catalysts, Meta has more upside variance. For investors focused on current fundamentals, Alphabet screens more favorably until Meta demonstrates cost discipline.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

Contact [email protected] for any questions or corrections.

Alphabet (GOOG -4.05%) (GOOGL -4.03%) has almost doubled over the past year, and its shares have handily outperformed the S&P 500 year to date. The online advertising giant continues to post high revenue growth while boosting margins.

While ads are still a major part of Alphabet's revenue, that's not what is attracting most investors. The company has positioned itself at the center of multiple AI opportunities, which have the potential to provide long-term market-beating returns at current levels.

These are some of the reasons investors are still excited about Alphabet.

Image source: Getty Images.

Cloud revenue is surging Google Cloud has become the most important part of Alphabet's business. The growth in cloud computing has quickly turned it into a large slice of total sales that could eclipse advertising revenue within a decade.

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Alphabet generated $24.8 billion from Google Cloud, compared to $94.5 billion in Google Services revenue, which is mostly from online ads. The cloud segment also grew by 82% year over year, compared to a 17% growth rate for Google Services.

The differences between those growth rates indicate why Google Cloud could become a larger part of the business than online ads. Its operating margins are also improving vastly. Google Cloud delivered $2.8 billion in net operating income in second-quarter 2025, and that figure more than tripled to $8.8 billion in the most recent quarter.

Google Cloud also reached a $514 billion backlog, with Gemini Enterprise playing a key role. It reached that level thanks to more than $50 billion in sequential growth. Nearly 90% of the Fortune 500 uses this feature, and as their budgets expand, so will Google Cloud's revenue.

Gemini reaches 950 million monthly active users Gemini was Alphabet's answer to ChatGPT. It was only a few years ago when bearish investors sounded the alarm about ChatGPT biting into Google's search engine market and putting the company in a challenging position.

Sometimes, the bears can overestimate risks, and that presented a compelling buy-the-dip opportunity for investors. The Gemini app recently crossed 950 million monthly active users, and the Q2 earnings call transcript offered more details.

Alphabet said that Omni, a feature in Gemini that lets users create videos based on prompts, experienced a 40% increase in daily active users creating videos on the Gemini app. The company is also working on Gemini 4, which is a more advanced AI model.

It's also attracting businesses. Gemini Enterprise is changing how companies create AI agents, enable automations, and set up cybersecurity. Alphabet has also become its own case study, with Gemini boosting conversions for its sales team and addressing 75% of support queries autonomously.

Waymo is gaining traction Waymo didn't get much attention in the Q2 press release, and executives just hinted at scaling Waymo in the Q2 earnings call. However, the self-driving vehicle company surpassed 500,000 fully autonomous rides per week in the first quarter.

Alphabet is still burning through cash to support this venture, but it has plenty of profits to make it work. This is similar to how Google endured many years of net losses for its cloud segment, and it became a critical part of the business.

Waymo established itself as the leader in the autonomous vehicle race. Grand View Research anticipates a 20.2% compound annual growth rate (CAGR) for this industry through 2033, suggesting Waymo has a lot of runway. Other companies are scrambling to capitalize on the opportunity, but being first can make it harder for competitors to penetrate the industry in a meaningful way.

As Waymo gets the green light to operate in more cities, demand should continue to build. Consumer benefits for this technology are vast. It's expensive to operate a business like Waymo, but that ironically gives Alphabet a massive advantage. Not only is it ahead of existing competitors, but the high barrier to entry keeps most potential competitors out of the industry.

Although there wasn't much news about Waymo in Q2, the self-driving company could become a significant part of the business within a few years.

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Google's AI divisions are getting reshuffled, the search giant announced on Wednesday, with chief scientist Jeff Dean leaving the company after 27 years.

Demis Hassabis, the CEO of Google DeepMind, is moving into a chairman role of that unit and also assuming the title chief scientist of parent company Alphabet, according to a memo from CEO Sundar Pichai that was posted to Google's blog.

Alpahbet shares fell about 4% after the announcement.

Dean, a pioneer in artificial intelligence who's been credited with some of Google's most important technical breakthroughs, is starting his own company along with Google senior fellow Sanjay Ghemawat, the post said. The departure is on friendly terms and Google will invest in his startup, a representative said.

"After an incredible 27-year run, Jeff Dean is at a moment where he wants to try something new, and we're excited to support him in that," Pichai said in the post. He added that Dean and Ghemawat will be working to "accelerate discoveries" in machine learning, science and engineering.

The shakeup, which includes promoting DeepMind technology chief Koray Kavukcuoglu to head of the AI division, comes as Google navigates a rapidly evolving AI industry, with the company trying to compete against OpenAI and Anthropic in developing the most cutting-edge frontier models while also pouring money into infrastructure so that its cloud division can serve customers as well as its own workloads.

In the latest quarter, Google turned cash flow negative for the first time on record due to its capital expenditures, while forecasting full-year capex of up to $205 billion. Kavukcuoglu will lead the development of Gemini 4, the company's next major AI model, and will report to Pichai.

Hassabis co-founded DeepMind and joined Google when the search giant purchased the lab in 2014. In recent years, he's been leading nearly all of Alphabet's foundational AI work.

"I've decided that now is the right time for me to hand over my day-to-day operational responsibilities at GDM, so that I have the time and space to focus on the big picture and help influence what is to come to the best of my ability," Hassabis said in a note to employees.

He added he would work with Pichai on "strategic and global" matters related to AI.

In a followup post on X, Dean said his new startup will be called Discovery Loop, and that it will be organized as a public benefit corporation focused on AI for science and engineering.

From a growth perspective, Google has been doing just fine on AI. The company's cloud division, run by Thomas Kurian, is expanding at a much faster clip than larger rivals Amazon Web Services and Microsoft Azure.

Cloud revenue at Google soared 82% in the second quarter to $24.8 billion. AWS reported revenue growth of 37% in the quarter, while Azure sales climbed 43%.

Pichai said on the earnings call that cloud expansion was driven by AI infrastructure and AI solutions, noting and was helped by demand for the company's homegrown tensor processing units (TPUs).

The report came a day after Google announced three new Gemini models, including its clearest answer yet to Anthropic's lead in cybersecurity, though the company still hasn't released Gemini 3.5 Pro, which has been delayed.

"Demand for our models is translating to strong token usage across developers and enterprise customers," Pichai said on the earnings call. "And we continue to be supply constrained, a sign of momentum and rapid adoption."

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By PYMNTS  |  August 5, 2026

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The United Kingdom’s Competition Appeal Tribunal rejected Google’s bid to block a class action lawsuit brought by advertisers alleging that the company abused its position in mobile operating systems, app distribution, search and search advertising to overcharge advertisers and exclude competitors.

In its Wednesday (Aug. 5) judgment allowing the case to proceed, the Competition Appeal Tribunal said that Google objected to the class representative’s funding arrangements and level of costs, amendments the class representative wanted to make to its claim form, the class representative’s class definition, and whether the proceedings should be certified on an opt-in or opt-out basis, according to a summary posted by the court.

The tribunal concluded that the certification should be on an opt-out basis, that the class representative’s level of costs was not a bar to certification, and that other matters, including the class definition, could be resolved later, according to the summary.

“The proceedings were therefore certified on an opt-out basis,” the Competition Appeal Tribunal said in the summary.

Google did not immediately reply to PYMNTS’ request for comment.

Bloomberg reported Wednesday that the class action lawsuit was filed on behalf of about 880,000 British firms and seeks as much as 5 billion pounds (about $6.7 billion) in damages.

It was reported in April 2025 that the claim accuses Google of implementing anti-competitive practices that restricted market access for rival search engines and ad providers.

The case argues that Google struck deals with mobile phone manufacturers to have its Search app and Chrome browser pre-installed on Android devices. It also charged that Google paid Apple to make Google the default search engine on iPhones and that these steps effectively limited customer choice and kept competitors at bay.

The claim alleges that these arrangements enabled Google to maintain its market dominance and charge businesses inflated prices for search advertisements.

At the time of the April 2025 filing of the case, Google dismissed the case as meritless.

A Google spokesperson called the lawsuit “yet another speculative and opportunistic case.” The spokesperson added: “We will argue against it vigorously. Consumers and advertisers use Google because it is helpful, not because there are no alternatives.”

President Trump's investment accounts made over 6,200 stock trades year to date through May, according to financial disclosures filed with U.S. Office of Government Ethics. Those accounts are managed by third-party advisors, meaning Trump was not responsible for any decision, but it's still interesting to explore where his money is invested.

This year, Trump bought shares of Alphabet (GOOGL +4.88%) (GOOG +4.44%), with net purchases totaling $1.7 million to $3.6 million through May. He also increased his stake in Meta Platforms (META +6.02%), with net purchases totaling $845,000 to $4.8 million over the same period.

Alphabet and Meta Platforms sit at the center of the artificial intelligence infrastructure build-out, and most Wall Street analysts believe the stocks are undervalued. Here are the important details.

President Donald J. Trump speaks on the phone in the Oval Office. Image source: Official White House Photo by Joyce N. Boghosian.

Alphabet: 20% upside implied by Wall Street's median target price Alphabet reported strong second-quarter financial results that beat estimates on the top and bottom lines. Revenue increased 24% to $119.7 billion, the sixth consecutive acceleration, driven by 82% sales growth in the cloud computing segment. Operating income (which excludes unrealized gains on its investment in SpaceX) increased 30% to $40.7 billion.

Alphabet shares have added 4% since the report, but the stock still looks very attractive at 18 times earnings. That is a massive discount to the five-year average of 24 times earnings, and the company has compelling growth prospects due to its full-stack approach to artificial intelligence (AI), which spans custom chips, cloud services, models, enterprise tools, and consumer applications.

On the earnings call, CEO Sundar Pichai highlighted momentum in each product category: Nearly 90% of Fortune 100 companies use Gemini Enterprise, a platform that helps businesses build AI agents and automate workflows. More than 9 million developers are building on the company's Gemini models each month. And Google Search engagement is trending higher due to AI Overviews and AI Mode.

Pichai also mentioned strong demand for custom AI chips called Tensor Processing Units (TPUs), the most popular alternative to Nvidia GPUs. Alphabet rents these chips to cloud computing customers, but it recently began selling TPUs directly to certain clients for use in external data centers. That shift positions Alphabet as a more direct competitor with Nvidia.

Wall Street estimates that Alphabet's earnings will increase at 14% annually over the next three years. That makes the current valuation of 17.9 times earnings look reasonable. In fact, most Wall Street analysts think the stock is undervalued. The median target price of $425 per share implies 20% upside from the current share price of $355.

Meta Platforms: 39% upside implied by Wall Street's median target price Meta Platforms delivered mixed financial results in the second quarter, beating analysts' consensus estimate on the top line but missing on the bottom line. Revenue increased 28% to $60.8 billion, but operating margin dropped 12 percentage points, and net income fell 13% to $6.18 per diluted share.

A combination of legal fees, severance costs, and heavy spending on AI infrastructure crushed margins and reduced earnings. That caused the stock to drop 10%. But there are silver linings. The expenditures related to lawsuits and headcount reductions were one-time charges, and investments in AI infrastructure lay the foundation for strong future growth.

"We are now at a point where our investments in AI are accelerating every major part of our core business," CEO Mark Zuckerberg told analysts. "They're improving the experience for people using our apps, driving better performance for advertisers, and helping our teams build new experiences and ship faster."

Zuckerberg also shed light on how Meta will monetize AI products in the future. "We're developing new personal agents that will be the foundation of our next wave of products." He noted the recent launch of Meta Business Agent, which answers questions and automates employee workflows. Meta is also exploring renting out excess data center capacity directly to customers through a new cloud computing division.

Wall Street expects Meta's earnings to grow at 21% annually over the next three years. That makes the current valuation of 21 times earnings look cheap. Indeed, among 71 analysts, Meta has a median target price of $770 per share. That implies 39% upside from the current share price of $554.

Alphabet (GOOG +4.78%) (GOOGL +5.24%) stock jumped 5.1% through 12:55 p.m. ET Monday after analysts at Morgan Stanley reassured investors about the company's prospects amid record levels of investment in AI infrastructure.

Image source: Alphabet.

Alphabet Q2 earnings Alphabet reported strong earnings last week, beating expectations with profits of $9.11 per share -- triple what analysts expected. Surprisingly, Alphabet stock sold off after the report and, in fact, continued to trade below its pre-earnings price all the way through Friday.

Earnings beat notwithstanding, investors were spooked by Alphabet's announcement that it was doubling down on AI spending and raising its forecast for capital investment this year to a mind-bending $195 billion to $205 billion.

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What Morgan Stanley said about Alphabet's spending But according to Morgan Stanley -- that's OK.

All four of the big AI hyperscalers are spending gobs of money on AI investment. Amazon (AMZN +4.62%) is spending even more than Alphabet -- $220 billion from $200 billion -- while Meta (META +6.15%) has a $130 billion to $145 billion budget, and Microsoft (MSFT +5.23%) is spending about $190 billion.

Total cloud capital expenditure in 2027 could exceed $1.2 trillion this year, says MS. But all this investment is driving huge cloud revenue growth, with Google Cloud Platform growing 82% year over year.

The best news, says the analyst, is that "strong operating cash flow, equity and debt financing, leasing strategies, custom chips, and infrastructure efficiencies are helping fund capex while easing free cash flow pressure," leaving Alphabet with still $53.3 billion in positive FCF over the past 12 months. For now, the analyst isn't worried about how much money Alphabet is spending.

Let's see if Morgan Stanley feels the same next year, when AI spending leaves Alphabet with a free cash flow loss.

Rich Smith has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.

Alphabet (GOOG -0.62%) (GOOGL -0.91%) has been a strong stock pick over the last few years, but I think investors just got another reason why it can continue to deliver incredible performance over the next few years. During its second-quarter earnings presentation, Alphabet informed investors that its Google Cloud backlog had spiked to $514 billion. For reference, Google Cloud generated $24.8 billion in revenue during Q2 2026. At that run rate, it would take Alphabet over five years to churn through its backlog. That's not going to happen in that long a time frame, as Alphabet will increase its computing resources to allow it to churn through that backlog much faster.

That is a recipe for great company success, and I think it will also deliver strong stock performance. If you don't have shares of Alphabet, now is the time to load up, while the market is distracted by spending rather than focusing on real business performance.

Image source: The Motley Fool.

You have to spend money to make money The market isn't all that concerned about Alphabet's dominant Q2 performance. Even though Google Cloud's revenue grew at a jaw-dropping 82% year-over-year pace and achieved a 36% operating margin, it cares more about how much Alphabet is spending. Alphabet hiked its capital expenditure guidance to $195 billion to $205 billion this year, which has the market concerned that it's overspending on its artificial intelligence (AI) computing capacity.

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However, I think this is short-sighted thinking. If you owned a business that was rapidly growing and could monetize part of that business via cloud computing, wouldn't you spend as much money as possible to maximize your market share? I think the market has lost sight of this, and that Alphabet is spending big because it knows there is a massive backlog that will turn into recurring revenue over the long term.

This justifies the spending, and I think it is all the reason investors need to load up on the stock.

But if you're looking for one more reason, the stock is also fairly priced. Alphabet's price-to-earnings (P/E) ratio metrics are skewed due to a massive return from its SpaceX investment. Instead, I'll value the stock using operating cash flow. From this perspective, Alphabet is approaching the lowest levels it has traded at in essentially a year, and I think it's a great value.

GOOG Price to CFO Per Share (TTM) data by YCharts

Alphabet has the growth and catalyst it needs to turn into an even larger company, and I think right now is the perfect opportunity to scoop up shares.

Alphabet (GOOG -1.23%) (GOOGL -1.17%) delivered a massive earnings beat last week, and it's driving S&P 500 earnings growth to the highest level since 2021. The mega-tech company posted earnings per share of $9.11, more than three times the $2.90 expected by Wall Street.

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According to FactSet, which tracks all S&P 500 financial results, Alphabet is now the largest contributor to year-over-year earnings growth for the S&P 500 for the second quarter. Without Alphabet's standout performance, earnings growth for the quarter would drop from 37.9% to 25.9%. Keep in mind that the company is just one of 500 in the index.

Yet much of Alphabet's surprising earnings figure was the result of $98 billion in unrealized gains on equities it holds. (The company also posted revenue of $119.8 for the quarter, up 24% from the same quarter a year ago. ) Alphabet owns approximately 4% of Space Exploration Technologies (SPCX +2.00%), and that stake was valued at about $94 billion after the company's June initial public offering. That's quite a gain on its original investment in SpaceX, which was less than $1 billion.

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Alphabet's huge gain is only on paper for now Of course, that's a paper gain right now. As is typical for early investors in IPO stocks, the position is currently restricted from sale. Some $80 billion is under short-term restrictions, and the rest can't be sold until late next year.

Ironically, SpaceX's own financials won't be reflected in S&P 500 earnings this year, as the company is not eligible to join the index until mid-2027 at the earliest. Even if it were already in the index, it would contribute nothing to S&P 500 earnings for the quarter, as the average Q2 earnings estimate for SpaceX is a loss of $0.28 per share.

However, because Google's investment in SpaceX grew enormously after the IPO, S&P 500 earnings growth is looking extremely healthy at the moment.

Image source: Getty Images.

There may be more such stock gains for Alphabet ahead. The company also holds a substantial stake in AI company Anthropic, the maker of the Claude chat engine. Alphabet's investment in Anthropic could also increase significantly when it goes public, which it has filed to do as soon as this fall. It's difficult to know at the moment what will happen to Anthropic's stock once it IPOs, but, like SpaceX, it's expected to achieve a $1 trillion valuation or higher. That would put a big tradable price on Alphabet's stake.

Alphabet's extremely successful investments don't tell investors much about its own operations, but investors in the company share in those gains regardless.

© Drew Angerer / Getty Images News via Getty Images

I keep hitting the buy button on Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction) for one reason: the company is turning its in-house AI silicon into an outside business, with first dollars landing this year.

For a decade, Google’s Tensor Processing Units were an internal cost lever. That posture is changing by the end of 2026, as AI turns Alphabet into an external chip and compute seller. On the Q1 2026 call, Sundar Pichai told investors Google will “begin to deliver TPUs to a select group of customers in their own data centers in the hardware configuration to expand our addressable market opportunity.” CFO Anat Ashkenazi added that TPU hardware agreements are already in the Cloud backlog, with “a small percent of them to come through as revenue later this year and then the majority to be realized as revenue in 2027.” That is the silicon shift driving my purchases.

The Receipts Demand is real. Google Cloud revenue grew 63% year over year to $20.03 billion in Q1 2026, and backlog nearly doubled quarter on quarter to over $460 billion. Cloud operating margin climbed from 17.8% to 32.9%, and revenue from products built on Google’s GenAI models grew nearly 800% year over year.

The money to deliver is committed. Alphabet raised 2026 CapEx guidance to $180 billion to $190 billion, up from $175 billion to $185 billion, after the Intersect acquisition, and Ashkenazi said 2027 CapEx will “significantly increase compared to 2026.” Q1 CapEx alone was $35.67 billion, up 107.44% year over year. Buildouts at this scale only make sense if capacity gets sold externally.

The base business funds it. Q1 EPS came in at $5.11 against a $2.63 estimate, the fourth consecutive quarter beating expectations. Operating income rose 30% to $39.7 billion, with operating margin at 36.1%. Search revenue grew 19% to $60.4 billion. The quarterly dividend was raised 5% to $0.22 per share. At a P/E of 26 on a $4.295 trillion market cap, with an 83.14% one-year return, I am paying a reasonable multiple for the compounder underneath the AI story.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

Why Alphabet Over Alternatives Hyperscaler investors typically reach for Microsoft, Amazon, or Meta. I pass on them. Pichai’s framing is what I trust: “The fact that we own frontier models and own the silicon really helps us stay ahead of the curve… I think we are the only provider in the market that offers all of these vertical stack elements.” Microsoft relies on a partner for its frontier model. Amazon builds accelerators but does not ship a consumer frontier model at Gemini’s scale. Meta buys most of its compute. Alphabet is the only US-listed name pairing a proprietary frontier model (Gemini processing 16 billion tokens per minute via direct API, up 60% from the prior quarter), its own accelerator generation (TPU 8t with 3x the processing power of Ironwood), a hyperscale cloud, and global ad distribution under one roof. That vertical stack keeps my dollars here.

The Risk CapEx is eating free cash flow. FCF fell 46.63% year over year in Q1 to $10.12 billion. If external TPU revenue slips deep into 2027 instead of trickling in late 2026, the FCF gap widens before it closes. I own that risk. A $462 billion Cloud backlog and 57 Buy ratings against zero Sell ratings tell me demand is booked and timing is a detail, not a thesis break.

I will keep buying Alphabet until the silicon shift stops being a footnote in the transcript and starts being a line item on the income statement.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

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Reddit (RDDT -2.21%) isn't sure that its current agreement with Alphabet (GOOG -0.02%)(GOOGL +0.08%) makes sense anymore. According to a report from the Wall Street Journal, the social media giant is contemplating a significant move: not making its content available for chatbots.

While Alphabet's Google Search does drive a lot of traffic to Reddit, it has also been declining, with users turning more to artificial intelligence (AI) chatbots such as OpenAI's ChatGPT or Alphabet's Gemini for answers. And those chatbots have been trained with online content, including Reddit's popular online message boards.

A possible change in strategy for Reddit would be a bold move, but I believe it's the right one.

Image source: Getty Images.

Reddit's revenue growth remains strong, but AI could pose a serious threat Reddit has a strong brand, with its communities being known for often offering balanced, two-sided arguments on common questions. Unlike a typical search query, which may just provide a direct answer, Reddit can offer more value to people seeking deeper analysis and thought. Due to its popularity, the social media giant has been experiencing significant growth in recent years, with ad revenue accounting for the lion's share of its top line.

RDDT Revenue (Quarterly YoY Growth) data by YCharts

The problem with AI chatbots, however, is that they can significantly impact traffic to Reddit if users get more complex answers without visiting the site's forums.

In 2024, Reddit and Google reached a $60 million-per-year deal that would allow Google to train its AI on Reddit's content. However, that may not be worth the long-term risk that it runs to Reddit's business, and it's a small fraction of the $2.5 billion in revenue the company has generated over the past four quarters. Reddit is reportedly considering not renewing its licensing deal.

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Is Reddit's stock worth buying right now? Reddit is right to question whether its AI deal makes sense. It should consider a far more lucrative agreement with Google to compensate it for the current and future traffic losses it may experience. It may simply be that a deal can't be reached, but it needs to protect its business and brand; if users can find the same types of answers from a chatbot, there may no longer be a need to visit Reddit's online communities.

Overall, Reddit's brand still appears strong, and the company does have leverage given the value and wealth of information it offers AI chatbots; I think it would be premature to worry about its business right now. With the stock down more than 20% this year, now may be a good time to buy it on the dip.

© patpitchaya / Shutterstock.com

Alphabet (NASDAQ: GOOGL | GOOGL Price Prediction) and Tesla (NASDAQ: TSLA) both reported Q2 results on July 22, 2026, and both got sold. Only one earned it. Google crushed estimates with Cloud accelerating to 82% growth. Tesla missed EPS by nearly 38.51% as operating margin collapsed. Same market reaction, opposite fundamentals.

One Beat Was Historic. The Other Miss Was Ugly. Alphabet posted EPS of $9.11 against a $3.0427 estimate, its 11th straight beat. Revenue hit $119.796 billion, up 24.23% YoY. Google Cloud jumped to $24.768 billion on enterprise AI demand. Sundar Pichai noted that “nearly 90% of the Fortune 100” now use Gemini Enterprise. Operating margin expanded to 34%. That is a high-margin cash engine widening its moat.

Tesla told a different story. EPS came in at $0.33 versus a $0.5367 estimate. Deliveries were a record 480,126 vehicles, yet operating income fell to just $398 million, a 56.88% drop. CFO Vaibhav Taneja said automotive margins excluding credits “declined sequentially from 19.2% to 16.3%”. Volume grew. Profit did not follow.

Business Driver Alphabet Tesla Headline Growth Engine Cloud +82% YoY Deliveries +25% YoY Operating Margin 34%, +2 pts 1.4%, compressed EPS Surprise +199.41% -38.51% Same Cash Drain, Very Different Reasons Both printed negative free cash flow, and that is where the market conflated them. Alphabet reported FCF of -$5.855 billion because CapEx doubled to $44.924 billion. Operating cash flow still grew 40.8% to $39.069 billion. The drain is a choice, funded by a machine that already prints cash.

Tesla’s -$1.092 billion in FCF is a squeeze. OpEx jumped 47% to $4.35 billion, CapEx rose 141.81%, and the core auto business is delivering thinner unit economics. Elon Musk framed it as “the best CapEx returns that we’ve ever seen”. The market disagreed. TSLA dropped 16.30% in two days, while GOOGL fell 6.53%. One drop looks like an overreaction. The other looks like a repricing.

What I’m Watching Into the Back Half For Alphabet, the question is whether Cloud can hold this trajectory to justify the $70 billion capital raise and the suspended buyback. A retail thread on r/stocks captured the concern plainly: “How do they plan to fund $180-190B in capex?” For Tesla, I want to see automotive ASPs stabilize before Cybercab and Optimus start pulling meaningful weight.

Why I Lean Alphabet Until Tesla’s Margins Recover On the fundamentals, Alphabet looks structurally stronger here. A high-margin business choosing to spend aggressively differs fundamentally from a low-margin business forced to. Tesla’s punishment fits the earnings report. If you are a turnaround investor who believes Robotaxi and Optimus reroute the P&L, TSLA at -30.39% YTD reflects that thesis. The cash engine funding its own moat carries a cleaner risk profile today.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

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July 22 was a pivotal day for Google parent Alphabet (GOOGL +0.58%)(GOOG +0.21%). It marked the first time in its storied history as a public company that it generated negative free cash flow -- an indication that management is spending aggressively on artificial intelligence (AI) infrastructure expansion.

But there's a lot more to Alphabet than just cloud infrastructure services platform Google Cloud and the company's integration of generative AI and large language model capabilities. Alphabet has evolved into one of Wall Street's savviest investors, and the company's second-quarter 10-Q filing with regulators fully or partially spilled the beans on how much its stakes in Space Exploration Technologies (SpaceX) (SPCX -2.85%) and AI start-up Anthropic are now worth.

Image source: Getty Images.

Google initially invested $900 million into Elon Musk's space and AI conglomerate in January 2015, when SpaceX was valued at roughly $12 billion. Although this 7.5% initial stake has been diluted a bit over the years, Alphabet's stake in SpaceX remains sizable.

In Alphabet's June-ended quarter, the 10-Q notes that $80 billion of its stake is subject to early release sale restrictions, while the remaining $14.1 billion is to abide by long-term restrictions through the third quarter of 2027. In other words, this $900 million initial investment is now worth a cool $94.1 billion.

JUST IN: Google discloses owning $94,100,000,000.00 in SpaceX stock, roughly a 6% stake.

-- Polymarket (@Polymarket) July 23, 2026 Alphabet may have the opportunity to begin ringing the register in a little over a week.

Whereas most newly public companies prohibit insider selling for the first 180 calendar days after an initial public offering, SpaceX has implemented a staggered and accelerated unlock schedule. Beginning two trading days after the company's first quarterly report on Aug. 4, early release-eligible insiders, including Alphabet, can start cashing in their chips.

Image source: Getty Images.

Google's stake in Anthropic may be approaching $124 billion In addition to outlining how much Google's longtime stake in SpaceX is worth, Alphabet's 10-Q also highlights the massive scale of its stake in Anthropic, the developer of the Claude large language model.

As of June 30, the carrying value of Alphabet's non-marketable equity securities in private companies was $124.3 billion. Bloomberg suggests that the overwhelming majority of this market value traces back to Google's stake in Anthropic.

$GOOGL stake in Anthropic is now worth $124B. pic.twitter.com/K9yyLbUgYy

-- Shay Boloor (@StockSavvyShay) July 23, 2026 Google has made several investments in Anthropic, starting with a 10% stake that cost $300 million in April 2023. This was followed up by another $2 billion investment, with $500 million upfront, in October 2023. More recently, in April 2026, Alphabet pledged $40 billion in add-on investments, with $10 billion upfront and the remainder dependent on performance milestones.

Having watched SpaceX and SK Hynix recently debut at $1 trillion-plus valuations, it's not out of the question that Anthropic adds that extra zero if and when it chooses to go public. If that happens, Alphabet will have cemented itself as a truly legendary investor.

Sean Williams has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

Alphabet (GOOG +0.21%)(GOOGL +0.58%) released its operating results for the second quarter of 2026 (ended June 30) after the market closed on Wednesday. Once again, artificial intelligence (AI) fueled strong revenue growth in important businesses like Google Search and Google Cloud.

However, Alphabet said it plans to spend even more on AI data centers during 2026 than originally expected, which made investors uneasy. These capital expenditures (capex) could seriously hurt the company's earnings power over the next few years, and thus lead to sluggish returns in its stock.

Alphabet stock immediately fell by around 7% following the release of the Q2 report, and it's now down 20% from its recent all-time high. Could this be the ultimate buying opportunity for long-term investors?

Image source: Alphabet.

Another strong quarter for Google Search and Google Cloud Google Search's advertising business is Alphabet's largest source of revenue. The company has infused AI-powered features into the search engine to fight off the competitive threat from chatbots like OpenAI's ChatGPT, and the strategy is working.

First, AI Overviews use text, images, and links to third-party sources to provide AI-generated answers to queries in Google Search. They appear above the traditional search results, so users no longer have to dig through web pages to find the information they need. Then there is AI Mode, which opens a chatbot-style interface where users can expand on their original query by asking follow-up questions. AI Mode already has 1 billion monthly active users, despite only launching globally last October.

Alphabet said these features are driving increased search usage overall. This is great news because it means users are seeing more ads, and the company is making more money. On that note, Google Search generated a record $63.3 billion in revenue during Q2, up 17% from the year-ago period.

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Google Cloud also had a very strong quarter. The cloud platform operates data centers all over the world that house thousands of specialized AI chips, and it rents the computing power to other businesses. It also offers a platform called Gemini Enterprise, where businesses can turn that computing capacity into finished AI chatbots, agents, and other applications. Alphabet says 90% of the Fortune 100 companies are using it already.

Google Cloud has consistently been the fastest-growing piece of Alphabet's business over the last couple of years, purely because of demand for AI-related services. Its revenue surged by 82% during Q2, to $24.8 billion.

Alphabet raised its capital expenditures forecast While Google Cloud is already growing at a blistering pace, it had a staggering $514 billion order backlog as of June 30, a $50 billion increase from the first quarter of 2026 just three months earlier. Most of that backlog was from AI customers who were waiting for more data center capacity to come online. In order to meet their needs, Alphabet has to spend a truckload of money to build more infrastructure.

When discussing the company's Q2 operating results, management said capex was on track to come in somewhere between $195 billion and $205 billion during 2026. That forecast was revised higher from $180 billion to $190 billion in management's previous update, and it followed $91 billion in spending last year.

Data centers and chips usually have a useful life of several years, so Alphabet doesn't account for these costs up front. Instead, it depreciates the infrastructure over time, which means these enormous capex sums could erode Alphabet's profits for years to come. That won't be a problem if AI computing capacity and enterprise tools remain in high demand, but that isn't a guarantee.

That's why investors wince every time a hyperscaler like Alphabet ramps up its capex plans even further. Every misallocated dollar today could reduce the company's earnings and dent its stock price for a very long time.

Alphabet stock looks cheap, so should investors buy the dip? On the surface, Alphabet's Q2 earnings soared by 294% year over year to $9.11 per share. But that's only because the company experienced a staggering $98 billion increase in the value of its investment holdings in companies like Anthropic and Space Exploration Technologies, which had nothing to do with its operating performance.

If we exclude those gains and also factor in Alphabet's capex, the company actually generated negative free cash flow of $5.8 billion during Q2.

Alphabet stock is trading at a much lower price-to-earnings (P/E) ratio than the Nasdaq-100 index (24.3 versus 33.4), suggesting it's cheaper than a basket of its big-tech peers. However, the stock might be far more expensive than it appears at face value after accounting for investment gains and capex, as demonstrated above.

I'm not saying Alphabet is a bad investment. It's a brilliant company with loads of long-term potential. But as an investor who doesn't already own it, I plan to wait on the sidelines for some of the dust to settle. If management adopts a more cautious approach to capex over the next couple of quarters, I might consider buying the stock.

Key Takeaways Alphabet leads search with 91.27% share as AI Overviews and AI Mode deepen user engagement.Google Search & Other revenues rose 17% to $63.3B, helped by retail, finance and better query monetization.AI Mode connects Instacart, Canva and YouTube Music, letting users complete tasks without leaving Search. Alphabet’s (GOOGL - Free Report) Search-related endeavors have received a massive push through AI integrations. The company is leading the search domain with 91.27% market share, followed by Microsoft’s (MSFT - Free Report) Bing, with 4.68% share, Yahoo!’s 1.28%, Yandex’s 0.79%, DuckDuckGo’s 0.67% and Baidu’s (BIDU - Free Report) 0.46%, per the latest data from StatCounter.

Alphabet’s dominance is being reinforced by rapid AI innovation rather than disrupted by it. On the second-quarter 2026 earnings call, the company highlighted that AI Overviews and AI Mode have been integrated into a single seamless Search experience, helping drive higher user engagement and incremental search queries. AI Mode has already surpassed one billion monthly active users, while Google continues to send billions of clicks to websites every week through its AI-powered search features, addressing concerns that AI could reduce web traffic.

Search monetization also remains strong. Google Search & Other revenues climbed 17% year over year to $63.3 billion, driven primarily by retail and finance advertisers. Alphabet noted that Gemini-powered improvements in query understanding allow Google to better monetize longer, more complex searches by delivering more relevant advertisements. AI-powered advertising products such as AI Max are already being widely adopted, with advertisers using these tools seeing higher conversions at similar returns on ad spend.

Alphabet is also expanding Search beyond traditional web queries into an AI-powered productivity platform. The company recently introduced integrations that allow users to connect services such as Instacart, Canva and YouTube Music directly within AI Mode, enabling actions like creating shopping carts, generating design templates and building playlists without leaving Search. These capabilities deepen user engagement while making Google’s ecosystem more valuable and difficult for competitors to replicate.

GOOGL Faces Tough Competition in the Search DomainAlphabet faces competition from Microsoft and Baidu in the Search domain.

Microsoft is strengthening its search ecosystem through Bing and Edge by embedding advanced AI capabilities across its consumer products. Microsoft is also integrating proprietary AI models into Bing, improving image generation, speech recognition and search experiences while benefiting from broader investments in Copilot, Azure AI and its multi-model strategy. These enhancements are designed to increase user engagement, improve search relevance and capture a larger share of digital advertising, creating a stronger competitive challenge for Google in AI-powered search.

Baidu is also accelerating its AI-first search strategy, particularly in China. The company has highlighted continued improvements in AI Search through enhanced planning, content generation and content-quality evaluation, enabling more intelligent and higher-quality search results while reducing low-quality content. Baidu plans to further integrate AI Search with ERNIE Assistant to improve information discovery, content understanding and task completion. The company has also reiterated that AI Search remains one of its highest-priority applications and will continue to receive investments to strengthen search accuracy and user experience.

GOOGL’s Share Price Performance, Valuation & EstimatesAlphabet shares have returned 1.5% year to date (YTD), outperforming the broader Zacks Computer and Technology sector’s return of 10.8%.

GOOGL Stock’s Price Performance
Image Source: Zacks Investment Research

GOOGL stock is trading at a premium, with a forward 12-month price/sales of 8.07X compared with the broader sector’s 6.46X. Alphabet has a Value Score of D.

GOOGL Valuation
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2026 earnings is pegged at $14.34 per share, up 0.3% over the past 30 days, suggesting 32.65% growth from 2025’s reported figure.
 

Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alphabet (GOOG -6.88%)(GOOGL -7.12%) gave investors plenty to debate in its second-quarter report this week, from 24% revenue growth to another big increase in its capital spending plans. But I'd argue the most remarkable number sat in the company's quarterly filing with the Securities and Exchange Commission. Alphabet's stake in rocket maker SpaceX (SPCX +2.58%) was worth about $94 billion as of June 30.

Zoom out, and the history behind that figure is extraordinary. In January 2015, Google and investment firm Fidelity together put $1 billion into SpaceX for a combined stake of just under 10%. SpaceX now carries a $1.5 trillion market value -- about 150 times what the entire company was worth in that funding round.

But Alphabet can't spend a dollar of its windfall yet. The filing shows the whole position is restricted from sale. About $80 billion of the stake sits under short-term restrictions (the standard lockup period that follows an initial public offering), and the remaining $14.1 billion is locked up through the third quarter of 2027.

Here's a closer look at what the stake means for shareholders on both sides of it.

Image source: Getty Images.

A windfall on paper The stake did wonders for Alphabet's reported profit. Second-quarter net income rose 298% year over year to $112.1 billion, and earnings per share climbed 294% to $9.11.

The driver wasn't advertising or cloud computing. It was a $99.0 billion gain on equity securities, which the company said primarily reflected unrealized gains from SpaceX and a private company (reported to be artificial intelligence (AI) developer Anthropic).

Unrealized is the key word. Alphabet didn't collect $99 billion in cash. It marked up shares it isn't currently allowed to sell.

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That distinction helps explain why investors mostly shrugged at the windfall and focused on spending instead. Alongside the report, Alphabet raised its capital spending guidance for 2026 to $195 billion to $205 billion, from the $180 billion to $190 billion range it set in April. Free cash flow swung to negative $5.9 billion for the quarter, down from a positive $10.1 billion in the first quarter. Also worth noting: the company raised $49.6 billion in June by selling new stock, all while sitting on $94 billion of SpaceX shares it can't touch. After all, locked-up paper gains don't fund data centers.

Shares of Alphabet were down about 7% Thursday afternoon as of this writing.

Of course, the stake still matters. It amounts to about 2.4% of Alphabet's roughly $3.9 trillion market capitalization -- a nice bonus for shareholders, but not the reason to own the stock.

The other side of the trade For SpaceX shareholders, the disclosure sends two messages at once.

The first is a vote of confidence. Alphabet has held on for more than a decade, and it still owns an effective stake of about 4.9% of the company, down from about 6% before recent dilution. An investor of Alphabet's caliber keeping a position this large is arguably part of the bull case.

The second message is about supply. SpaceX stock has had a rough public debut. Shares went public at $135 in June, peaked at $225.64, and trade at about $116 as of this writing -- a decline of nearly 49% from the high.

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And the restrictions on Alphabet's stake begin easing after SpaceX delivers its first earnings report, scheduled for Aug. 4. Alphabet hasn't said anything about selling. But an outside holder with $94 billion of stock and a spending plan of its own approaching $200 billion at least has reasons to consider it once it's allowed.

Also, SpaceX shares have fallen since June 30, so the stake is already worth less than the filing's mark. Paper gains move in both directions.

So what should investors do with the news? For Alphabet shareholders, I'd treat the SpaceX windfall as exactly that -- a windfall. The investment case still rests on the operating business (where revenue grew 24% year over year last quarter and Google Cloud is accelerating) and on whether the company's enormous AI spending pays off.

For anyone eyeing SpaceX stock, though, the filing is worth remembering. The company is still losing money, its market value sits near $1.5 trillion, and one outside holder alone is sitting on $94 billion of stock it will soon be free to sell. Between the two stocks, I'd rather own the shareholder than the rocket maker.

The AI boom didn't stop Google from hiring nearly 12,000 people By You're currently following this author! Want to unfollow? Unsubscribe via the link in your email.

and Madison Hoff You're currently following this author! Want to unfollow? Unsubscribe via the link in your email.

Google CEO Sundar Pichai. Benjamin Fanjoy/Getty Images As companies make rounds of job cuts and double down on AI spend, Google's parent company Alphabet is expanding its workforce.

Alphabet reported blockbuster second-quarter earnings, with revenue climbing 24% year over year to $119.8 billion. The company revealed in its earnings report that it increased head count by 11,830 employees, from 187,103 to 198,933, between June 30, 2025 and June 30, 2026.

The chart below shows how Alphabet's workforce has grown from the end of the first quarter of 2025 through the end of the second quarter of 2026.

The biggest jump in Alphabet's head count of the last couple of years came in the second quarter of 2026, when the company added over 4,000 workers, accounting for more than one-third of net hiring over the past year.

Since 2022, companies including Google, Meta, Amazon, and Microsoft have cut thousands of jobs. Google laid off 12,000 employees in 2023 and has conducted several smaller rounds of cuts since, impacting thousands of employees in total.

Google employees from around the country rallied last week to demand stronger protections against layoffs. Roughly 4,500 employees signed a petition about job security addressed to CEO Sundar Pichai and three senior executives at the tech giant.

While Google didn't share which roles it has hired more of over the last year, the company said in its earnings on Thursday that it's prioritizing long-term AI growth and doubling down on its AI buildout.

The tech giant raised its 2026 capital expenditure outlook to between $195 billion and $205 billion, up from a previous estimate of up to $190 billion. The company said its demand for AI infrastructure continues to outpace available capacity.

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Ana Altchek You're currently following this author! Want to unfollow? Unsubscribe via the link in your email.

Madison Hoff You're currently following this author! Want to unfollow? Unsubscribe via the link in your email.

Madison Hoff is a reporter on Business Insider’s economy team. She covers the labor market, inflation, spending, and other data. In addition to covering new estimates and trends, her workforce reporting includes career pivots, job searching, and side hustles.She also covers downsizing, particularly people selling their houses to pursue RV living. She has also reported on how much teachers spend out of pocket and what it’s like being a caregiver.Her stories often cover the state of the economy, what experts are saying, and how people are navigating the workplace or their careers.Previously, she was a junior reporter and data editorial fellow on the Strategy team.A few of her stories:

Job-market trend: Welcome to the 'Great Freeze': Why companies aren't firing, workers can't grow, and the unemployed can't get jobsJob-market trend: Everyone's focused on AI — but it's aging Americans who are quietly rewiring the job marketCareer pivot: I retired early from my federal job and took a part-time job at TJ Maxx. I'm happier and less stressed.Downsizing/RV living: An empty-nester couple who traded in a $400K house for an $80K RV explain their favorite parts of retirement on the roadJob searching: People who haven't had steady work for at least a year are networking, doing temporary jobs, and soul-searchingSide hustles: A millennial who used side hustles to pay off debt explains the lucrative and easy ones she recommendsTeacher spending: A teacher who spent more than $5,000 of her own money to make a cozy classroom explains why it helps kids learn Google AI Tech More Layoffs

He also acknowledged that the company remains “supply constrained” as AI demand continues to outstrip available computing capacity.

Enter Frozen v2Those comments help explain reports that Alphabet is developing Frozen v2, a next-generation AI chip designed to run Gemini models more efficiently.

According to The Information, Frozen v2 integrates parts of Gemini’s architecture directly into the hardware. Engineers reportedly believe the chip could process six to 10 times more AI tokens per unit of power than Google’s latest custom AI chips, potentially allowing the company to serve far more AI requests without a proportional increase in infrastructure.

The broader takeaway is that Google’s AI hardware strategy is increasingly being driven by demand rather than technological ambition alone. As Gemini adoption accelerates across Search, Cloud and enterprise products, the company is racing to build infrastructure that can keep up.

For investors, Frozen v2 represents more than another AI chip. It is Google’s attempt to solve a problem created by its own success: processing tens of billions of AI tokens every minute while easing growing compute constraints.

Image via Shutterstock

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I keep hitting the buy button on Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction) because the business behaves like a tollbooth on the entire internet, and every quarter the toll gets higher while the road gets wider. Warren Buffett appears to have arrived at the same conclusion. I got there first for my own account, and I am still adding.

The pitch is simple. Google Search is a self reinforcing flywheel. More queries feed better data, better data sharpens targeting, sharper targeting draws more advertising dollars, and those dollars fund the next turn of the wheel. Buffett views Alphabet’s moat through the search network flywheel and the capital scale that lets the company fund custom AI chips and global data centers straight out of cash flow. Smaller competitors cannot match that without crippling themselves. I want to own the tollbooth.

The Receipts Behind the Conviction Start with the flywheel itself. In the first quarter of fiscal 2026, Google Search & other revenue reached $60.40 billion, up 19%, and Pichai told shareholders “queries at an all time high”. That is a two decade old business still compounding at scale.

Then the second engine. Google Cloud revenue grew 63% to $20.03 billion, and backlog nearly doubled quarter on quarter to over $460 billion. Cloud growth has climbed from 32% to 34% to 48% to 63% across the last four quarters. Backlog of that size is a customer signing a promise to pay Alphabet years into the future.

The economics of this machine are what keep me buying. Return on equity sits at 38.9%, profit margin at 37.9%, and operating margin at 36.1%. EPS of $5.11 crushed the $2.63 consensus, the fourth consecutive beat. Over the trailing year, the stock is up 83.14%, and I am still buying because the P/E is 26.

Why Not Microsoft or Meta The obvious alternative is Microsoft (NASDAQ:MSFT). Azure is a real cloud competitor, but I pass because Microsoft trades at a price to sales ratio of 9.39 against Alphabet’s 10.17, yet Alphabet is compounding cloud revenue at 63% versus Microsoft’s 18.3% overall quarterly revenue growth. I am paying a similar sales multiple for faster growth and a wider consumer moat.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

Meta Platforms (NASDAQ:META) is the other name I hear. It trades at a P/E of 23, cheaper than Alphabet on paper. My problem is concentration. Meta’s revenue is essentially all advertising, with no cloud franchise to catch the enterprise AI wave. Alphabet has ads, cloud, YouTube, and Waymo. Waymo surpassed 500,000 fully autonomous rides per week. That optionality is free with the ticker.

The Real Risk The risk that keeps me awake is capital intensity. CapEx hit $35.67 billion in the quarter, up 107.44%, and 2026 guidance is $175 to $185 billion. Free cash flow fell 46.63% year over year to $10.12 billion. If AI demand disappoints, that spending becomes a stranded asset problem.

I stay long anyway because the backlog is real, operating cash flow still grew 26.67%, and the same capital scale that pressures near term free cash flow is the moat itself. Only a handful of companies on earth can write these checks from operating cash.

Alphabet owns the tollbooth, funds the next mile of road from the toll receipts, and pays me a dividend it just raised 5% to $0.22 while I wait. That is why the buy button stays warm.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Google didn't make the cut. Grab the names FREE today.

Contact [email protected] for any questions or corrections.

Alphabet Inc (NASDAQ:GOOG) shares fell almost 3% after hours, wiping almost $125 billion from its valuation, despite second-quarter results that beat Wall Street forecasts on both revenue and earnings.

The Google parent reported revenue of $119.8 billion and earnings per share of $9.11, against analyst expectations of $116.9 billion.

Google Cloud revenue rose 82% year on year to $24.77 billion, and remaining performance obligations, the value of contracts signed but not yet delivered, reached $514 billion against a forecast $488.1 billion.

The share price reaction points to the number investors actually cared about.

Capital expenditure hit $44.9 billion in the quarter, double the same period last year, keeping Alphabet on track for full-year spending of $180 billion to $190 billion.

Free cash flow fell roughly 47% year on year in the first quarter to $10.1 billion, and chief financial officer Anat Ashkenazi has already told investors 2027 spending will increase significantly again.

The stock has dropped in each of the past three months and sits below its 52-week high, behind Apple and Nvidia for the year despite an 11% gain.

Adding to the unease, Bloomberg reported Google has delayed its Gemini 3.5 Pro model over concerns about how it compares with rivals, a claim the company disputes.

The click that never comes

Beneath the quarterly numbers sits a structural problem that no earnings beat resolves.

Google's advertising business, which delivered $81.63 billion this quarter, depends on an open web of publishers producing the content its search results index and monetise.

That web is contracting.

Ahrefs data published in February found AI Overviews, the AI-generated summaries Google places above search results, cut click-through rates for the top-ranked link by 58%, nearly double the figure measured eight months earlier.

Roughly 83% of searches featuring an AI Overview end without a click to any website.

The consequences are already visible: Business Insider lost 55% of its organic traffic and cut 21% of staff, CNN saw traffic fall about 30% year on year, and DMG Media, owner of MailOnline, reported click-through declines of up to 89% on affected queries.

Gartner forecasts that half or more of organic search traffic to websites will disappear by 2028.

Eating the goose

The logic is uncomfortable for Alphabet. Search advertising works because users click through to pages carrying more advertising, much of it also sold by Google.

If publishers close, the corpus of fresh, reliable content that makes AI Overviews useful thins out, and the inventory Google monetises across the wider web shrinks with it.

Advertisers then concentrate spending inside the walled gardens, which flatters Google in the short term and narrows the ecosystem it depends on over the longer term.

Wall Street has so far treated this as someone else's problem, focusing instead on cloud growth and capex discipline.

That is unlikely to hold indefinitely. The moment search revenue growth decelerates while capital spending keeps climbing, the two stories converge, and investors will be asked to value a business that has consumed part of its own supply chain.

Editor’s Note: The transcripts have been removed and were published in error.

Alphabet (NASDAQ:GOOGL) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

The full earnings call is available at https://abc.xyz/investor/events/event-details/2026/2026-Q2-Earnings-Call-2026-GgTAq7Is0z/default.aspx

SummaryAlphabet Inc reported its financial performance for the second quarter of 2026, highlighting strong revenue growth driven by its core services and new initiatives.

The company emphasized its strategic focus on AI technology, particularly through the development and implementation of AI-driven solutions like Gemini, which aims to solve complex problems across various sectors.

YouTube TV was highlighted as a key product with expanding service plans, reflecting the company’s commitment to diversifying its revenue streams beyond traditional advertising.

Alphabet Inc announced continued investment in its cloud services, aiming to leverage AI capabilities to enhance its offerings and maintain competitive advantage.

Management expressed optimism about the future, focusing on the potential of AI to drive growth and innovation, while also addressing the company’s mission to tackle solvable diseases with new technology.

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YouTube ad revenue increased 13% in the second quarter compared with the same period a year ago, helping to pace parent Alphabet‘s financial performance.

Total revenue rose 24% in the quarter to hit $119.8 billion, while earnings per share nearly quadrupled to $9.11. Both metrics were ahead of Wall Street expectations.

YouTube pulled in $11.06 billion in ad revenue, showing double-digit growth that has eluded its traditional media rivals in recent years. Along with its deep well of creator content, YouTube is increasingly looking to cross over into traditional entertainment, landing rights to the Academy Awards and NFL football games.

RELATED: The NFL Wants To Attract Younger Fans; YouTube Blitzed Super Bowl LX To Try To Make That Happen

In the company’s earnings release, Google and Alphabet CEO Sundar Pichai flagged YouTube’s popularity as a way for people to keep current. “Month over month, people turn to YouTube for major world events, with over 1.7 billion unique viewers watching World Cup-related videos during the FIFA World Cup,” he wrote.

Debate about the stocks of Alphabet and the other “magnificent seven” tech giants (Nvidia, Apple, Amazon, Meta, Tesla and Microsoft) preceded the earnings release. Some Wall Streeters fret about a recent divergence between the “mag seven” and semiconductor shares, given that chipmakers have slumped recently despite their key role in the AI boom.

RELATED: UK Government Unveils Plan For Midnight Social Media Curfew For Older Teens

Google, initially a laggard in AI, has moved the head of the sector during the past few quarters, though it also faces questions about strategic plans for Gemini and other tools.