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Google's parent company Alphabet raised the top end of its CapEx plan for this year to $205 billion, but discipline on spending is becoming a concern. Eric Sheridan, Goldman Sachs co-business unit leader of its Technology, Media and Telecommunications Group in global investment research, says Alphabet is well positioned to benefit from the growing demand for AI across both consumer and enterprise markets.

Tony Zipparro and Ben Connard break down their biggest takeaways from Alphabet's (GOOGL) earnings, including the Mag 7 firm's decision to raise CapEx to $195 billion from $180-$190 billion. They also explore the key drivers that could fuel Alphabet's future growth, like Google cloud, which showed an 82% revenue increase year-over-year.

GOOG stock is down after earnings. See the chart and price action here.  A 33-Quarter Buyback Streak EndsAlphabet bought no stock in Q1, breaking a 33-quarter run, and Q2 confirmed this was a strategic reset, not a temporary pause. 

Repurchases remained at zero, compared with $13.24 billion in the same quarter last year. Across the first half, Alphabet repurchased nothing after spending $28.31 billion during the comparable 2025 period.

The buyback halt was not caused by an exhausted authorization. A sizable balance remained available when 2026 began, giving management ample room to continue repurchases. Instead, Alphabet redirected cash toward the escalating infrastructure demands of AI.

AI Spending Overwhelms Cash FlowCapital expenditures rose from $27.85 billion in Q4 2025 to $35.67 billion in Q1 2026. They then jumped to $44.92 billion in Q2. Quarterly capex exceeded $39.07 billion in operating cash flow, pushing free cash flow to negative $5.86 billion.

The trajectory is becoming steeper. Alphabet raised its 2026 capex outlook to $195 billion to $205 billion, up from $180 billion to $190 billion. The new range carries a $200 billion midpoint, matching the headline figure.

On the company’s earnings call, management said technical-infrastructure investment would continue pressuring free cash flow.

Shareholder Returns Take a Back SeatThis marks a dramatic reversal in capital allocation. Alphabet repurchased $45.71 billion of stock in 2025, after spending $62.222 billion in 2024 and $61.5 billion in 2023. 

Buybacks had steadily reduced the share count and helped absorb dilution from employee compensation. They also provided a recurring source of demand for the stock.

Now, servers, chips, networking gear and data centers have moved ahead of financial engineering. The shift reflects confidence in AI demand, but it also raises the hurdle for returns. Alphabet must generate enough incremental revenue and profit to justify spending on a historic scale.

The Bottom LineFor shareholders, the immediate equation has changed. Less cash is supporting the stock through repurchases, while more cash is locked into long-lived infrastructure. Depreciation and operating costs will follow as those assets enter service.

Alphabet’s buyback machine did not slow because the company ran out of authorization — it stopped because AI became the priority. 

After two consecutive quarters at zero, the evidence points to a new capital-allocation regime, with shareholder returns taking a back seat to the largest infrastructure buildout in Alphabet’s history.

GOOG Stock Price Activity: Alphabet shares were down 6.16% at $320.86 at the time of publication Thursday, according to Benzinga Pro.

Over the past month, GOOG has declined about 5.7% versus a 0.7% rise in the S&P 500 and is up roughly 1% year-to-date compared to the index’s 7.7% gain.

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CNBC’s MacKenzie Sigalos framed the tension bluntly, noting that “Alphabet shares are now in correction territory down 13% from their May all-time highs. Investors questioned the returns on its enormous AI build-out.” The math behind that skepticism is the story. Alphabet (NASDAQ: GOOGL | GOOGL Price Prediction) is spending at a pace that would have looked implausible a year ago, and the market is asking whether returns can keep up.

The Capex Curve Is Bending Upward Sigalos flagged the pace: “Alphabet is already on pace to spend nearly $200 billion this year, with Q2 capex expected to double from a year ago. Bank of America sees spending approaching $300 billion in 2027.” Alphabet’s numbers back that up. Q2 capex hit $44.924 billion, up 100.14% year over year, following $35.67 billion in Q1. Full-year 2026 guidance sits in the $175 billion to $185 billion range, roughly double FY2025’s $91.45 billion.

Sigalos added the uncomfortable wrinkle on efficiency: “As rising component costs absorb more of that increase, each additional dollar buys less capacity.” That is the argument reshaping how the Street looks at hyperscaler ROI. Nominal capex is climbing faster than the compute it actually buys.

Funding the Build The financing side is where the correction gets its teeth. Sigalos noted, “Alphabet has raised more than $140 billion in debt and equity since October. With some analysts now modeling free cash flow to turn negative next year.” Alphabet has already crossed that line. Q2 free cash flow came in at -$5.9 billion, and long-term debt nearly doubled from $46.5 billion to $98.2 billion.

The company raised roughly $70 billion in combined equity and debt in Q2 alone, established an at-the-market program for up to $40 billion of Class A and Class C stock, and suspended its share repurchase program. Interest expense rose nearly 5× year over year. That combination—suspending buybacks, issuing dilutive equity, and taking on sharply higher interest expense—represents a structural change from the Alphabet investors owned two years ago. Details are available in the company’s Q2 2026 SEC filing.

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What the Cash Is Buying The bull case rests on whether the spend converts to durable revenue. Q2 gave Sundar Pichai plenty to work with. Google Cloud revenue reached $24.77 billion, up 82% year over year. Total revenue climbed to $119.8 billion, up 24.23%, the 12th consecutive quarter of double-digit growth. Operating income rose 30.38% to $40.77 billion with a 34% operating margin.

Pichai told investors, “Q2 was an amazing quarter, with Alphabet revenues growing 24% year-over-year and Google Cloud revenues accelerating to 82% growth, driven by demand for AI infrastructure and AI solutions. It’s great to see wide adoption of Gemini Enterprise, with nearly 90% of the Fortune 100 using it.” Gemini models are processing 22 billion API tokens per minute, up from 7 billion in Q3 2025, and the Gemini App reached 950 million monthly active users.

Sigalos added: “Alphabet still has advantages that few others can match. One of tech’s strongest balance sheets, stakes in both space and Anthropic, and a highly profitable search franchise that continues to fund the build-out with no clear signs of AI cannibalization.” Search & other revenue rose 17% to $63.27 billion, evidence that the legacy cash engine is still expanding while the capex bill compounds.

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ToplineGoogle on Thursday introduced a new way to sign in or recover locked Google Accounts, putting biometric identity verification directly in the hands of its users by allowing them to record directed via selfie videos and submit them in lieu of a traditional password or security question.

Sign with logos for Google and YouTube.

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Key FactsGoogle’s new selfie video sign-in feature lets users record a short clip of themselves with head movement guidelines to verify their identity and, next time they need access to their account, they can take another selfie to get back in.

The new software compares the new selfie to the original video—requiring users to perform simple movements to prove it's a live video—to confirm the user’s identity.

The recorded video is stored in encrypted form with the option to delete it at any time, Google says, promising advanced checks are built in to block deepfake videos and impersonation attempts.

Key backgroundThe feature arrives amid a broader account-security push from Google that has so far included fake-call detection against AI scams in June and the suing of a Chinese cybercrime operation that used AI to defraud hundreds of thousands of victims, according to TechCrunch. It’s also a major expansion of biometric account recovery, which has been a contested space: Apple has offered Face ID-based authentication since 2017, while Microsoft expanded Windows Hello facial recognition to account recovery workflows years ago. While it can be used as a regular sign-in, Google is largely positioning the selfie as a backup option specifically for lockout scenarios—the gap where users lose their phone or can't access their usual device.

TANGENTThe timing of the new feature is notable: Google’s parent company Alphabet just reported second-quarter Google Cloud revenue of $24.77 billion, up 82% year-over-year, with CEO Sundar Pichai noting that nearly 90% of the Fortune 100 now use Gemini Enterprise, Google’s AI suites for businesses. The company on Wednesday said its Gemini app now has 950 million monthly active users.

further readingForbes950 Million People Now Use Gemini Each Month As Alphabet Posts Earnings BeatBy Ty Roush

ForbesAlphabet Rally Boosts Google Cofounder Fortunes By $15 Billion—Here’s Why Shares Are UpBy Ty Roush

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Google's cloud chief Thomas Kurian said the company's existing customers are shelling out "roughly 50% more" than they've already committed to spend on its products, which helped drive its red-hot cloud growth during the second quarter. 

"Our existing customers have increased their spend when they make a commitment to us," Kurian told CNBC's Jim Cramer on Thursday. "They're spending roughly 50% more than the commitment, and so it comes down to the differentiation in our product portfolio, the strength we have in our go-to-market execution, and you see that in both top line and operating income growth."

Kurian's comments come after Google parent Alphabet posted better-than-expected revenue for the second quarter on Wednesday, helped by growth of 82% year-on-year in its cloud business.

Demand for its cloud services is strong enough that the company plans to call on third-party providers to fill in extra capacity. That drove shares of neocloud providers CoreWeave and Nebius higher.

Read more CNBC tech newsMoonshot AI accessed Nvidia's chips despite Chinese export ban, White House official saysAlphabet and Tesla test Wall Street's patience as AI spending overshadows growthAlphabet earnings takeaways: Q2 revenue beats, GOOGL stock sinks on 2026 capex hikeTesla misses on earnings, as free cash flow turns negative and margins slideKurian said the move is necessary, even though it will hurt margins, because it allows Google to capture that demand and those customers tend to spend more on its other services.

"So for us, when we look at the short term, we're going to rent some capacity for you know a few quarters," Kurian said. "It allows us to bring customers in, bridge them over to when we have sufficient capacity available, and then that will compound over time, and the return on investment makes sense for us."

Alphabet shares plunged more than 7% on Thursday after the company boosted its capital spending forecast to as much as $205 billion this year, worrying investors who are jittery about ballooning artificial intelligence budgets.

The company said it now expects to spend between $195 billion and $205 billion in 2026, up from the $180 billion to $190 billion forecast provided last quarter. Its capex reached $44.9 billion during the second quarter, with most of the spending going toward AI infrastructure.

Tech companies are burning through cash to bankroll spending on AI infrastructure, while trying to reassure Wall Street that those investments will yield returns.

Before Alphabet's second-quarter report, tech's megacaps were expected to spend roughly $725 billion this year on AI initiatives. That total will likely rise as more of Alphabet's peers post quarterly earnings in the coming days. Amazon, Microsoft and Meta will all report results next week.

Kurian defended the company's "very, very disciplined" capex spending and said companies are seeing real returns on utilizing Google's AI solutions.

"Macy's, for example, has found as they deployed our AI system, it's improved the size of the shopping basket that they see," he said. "We've seen Macquarie Bank save a lot of processing time by automating many of the workflows in their organization."

Alphabet's second-quarter free cash flow turned negative for the first time as the Google parent ramps AI spending, leaving Wall Street divided over whether the investment will pay off.

The company said its marketable equity securities include $80 billion in short-term restricted shares and $14.1 billion restricted through 2027.

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Tesla (NASDAQ: TSLA | TSLA Price Prediction) and Alphabet (NASDAQ: GOOGL) both reported Q2 2026 results on July 22, 2026, and both printed negative free cash flow in the same window. One is spending from a position of strength. The other is spending while its core business bleeds margin.

One Cash Drain Is a Choice. The Other Is a Squeeze. Alphabet posted revenue of $119.796 billion, up 24.23%, with EPS of $9.11 against a $3.0427 estimate. Google Cloud grew 82% to $24.768 billion, and Sundar Pichai told investors that “nearly 90% of the Fortune 100” now use Gemini Enterprise. Operating margin expanded to 34%. This is a company being paid to spend.

Tesla’s story reads differently. Revenue came in at $28.236 billion, a 7.10% beat, but EPS of $0.33 missed by 38.51%. Operating margin cratered to 1.4% as operating expenses jumped 47% on AI compute, R&D, and stock-based comp tied to the 2025 CEO Performance Award. Regulatory credits collapsed to $146 million from $739 million a year ago.

Vertical Bet vs. Horizontal Bet Lens Tesla Alphabet Q2 FCF -$1.092 billion -$5.855 billion CapEx YoY +141.81% +100.14% Op Margin Direction Compressing Expanding Core Bet Robotaxi, Optimus, chips Cloud, Gemini, tokens Tesla is building vertically. Cybercab production started at Gigafactory Texas, the Semi factory in Nevada is commissioning, and an Austin semiconductor fab is progressing with SpaceX. Alphabet is building horizontally, funding data centers that rent AI back to enterprises. Pichai framed it plainly: “Our AI investments are redefining what’s possible across every part of our business.”

The balance sheets tell you how confident each management team feels. Tesla is self-funding with $43.524 billion in cash. Alphabet raised roughly $70 billion in combined equity and debt, pushed long-term debt from $46.5 billion to $98.2 billion, and suspended buybacks. That is aggression.

What Decides Who Wins This Cycle I will be watching whether Tesla’s 1.48 million active FSD subscriptions and the seven-metro Robotaxi footprint start feeding real software margin fast enough to offset the automotive ASP slide. For Alphabet, the tell is Cloud’s operating leverage. If 22 billion tokens per minute keeps compounding, the capex pays for itself.

Why I Lean Alphabet Today, With One Caveat Personally, Alphabet’s quarter looks like the safer version of the same bet. Margins are expanding while it spends, Cloud is accelerating, and the debt raise gives it optionality. The stock still fell 7.77% on the week, which tells me the market wants proof the capex will convert. Tesla is the higher-variance trade. If Optimus or Robotaxi hits in 2026, that 1.4% margin becomes a footnote. If they slip, the 16.83% year-to-date decline is not the bottom. The setup to watch is whether Tesla can deliver one clean quarter of margin recovery, and whether Alphabet’s Cloud growth stays above 50%.

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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.

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Alphabet Today

$319.74 -22.35 (-6.53%)

As of 12:38 PM Eastern

This is a fair market value price provided by Massive. Learn more.

52-Week Range$187.82▼

$408.61Dividend Yield0.27%

P/E Ratio24.41

Price Target$415.65

Alphabet NASDAQ: GOOGL delivered its Q2 2026 results after the close on Wednesday, and by almost any measure, it was an exceptional quarter.

Revenue hit a record. Google Cloud growth accelerated to a pace nobody expected. Earnings per share nearly quadrupled.

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And yet the stock fell in after-hours trading and extended those losses before the next session, even as the report showed strength.

The disconnect between the headline numbers and the market's reaction is the story worth understanding here.

A Quarter of RecordsTotal revenue came in at $119.8 billion, up 24% year over year from $96.4 billion, comfortably ahead of the $116.93 billion consensus. That marked Alphabet's 12th consecutive quarter of double-digit revenue growth. Operating income reached $40.77 billion with an operating margin of 34%.

The standout was Google Cloud. Revenue surged 82% year over year to $24.8 billion, blowing past the roughly $22.3 billion analysts had modeled by about 11%. That is a dramatic acceleration from the 63% growth posted in Q1, and it extends Google Cloud's lead over both Microsoft's NASDAQ: MSFT Azure and Amazon's NASDAQ: AMZN AWS in growth terms for a second straight quarter. Cloud operating income more than tripled to $8.8 billion from $2.83 billion a year ago, a sign that scale is finally translating into serious profitability. The cloud backlog swelled to $514 billion, up from $462 billion last quarter.

Google Services held up well, too, growing 15% to $94.5 billion. Search and other revenue rose 17% to $63.3 billion, essentially in line with expectations and further evidence that AI is expanding rather than cannibalizing the core franchise. YouTube advertising grew 13% to $11.1 billion, and subscriptions, platforms, and devices climbed 15% to $12.9 billion. CEO Sundar Pichai noted that nearly 90% of the Fortune 100 are now using Gemini Enterprise.

The $99 Billion AsteriskThen there is the headline that requires context. Alphabet reported net income of $112.1 billion, up 298% year over year, and diluted earnings per share (EPS) of $9.11, up 294% and far above the roughly $2.89 analysts expected. Those numbers are real, but they are not operational. They were driven overwhelmingly by a $99 billion gain on equity securities, largely reflecting the mark-to-market revaluation of Alphabet's stake in SpaceX NASDAQ: SPCX and Anthropic as both valuations soared. Accounting rules require Alphabet to run those unrealized gains straight through the income statement, so the profit appears without a dollar changing hands. Strip it out, and operational EPS lands closer to the $2.87 analysts were actually looking for.

What Spooked the MarketThe selling pressure traces back to two words: capital expenditures. Alphabet spent $44.9 billion on capital expenditure in the quarter, up 100% year over year and up 26% sequentially. Free cash flow swung to negative $5.86 billion as a result. Management also signaled further spending increases ahead, and investors, already jumpy about how much capital the mega-caps are committing to AI, chose to focus there rather than on the cloud acceleration.

The Technical PictureFrom a technical perspective, the bulls might quietly be cheering this sell-off. Following such a stellar report, the pullback and broader market jitters could ultimately create an opportunity to own the stock at a far more reasonable valuation. On a higher timeframe, GOOGL remains in a clear uptrend. But zooming in, the stock has fallen almost 20% from its record high and is now approaching its 200-day Simple Moving Average, a key long-term trend indicator and one the bulls will want to see hold firm. If shares retrace toward that structural level and find support, with the forward price-to-earnings (P/E) compressing closer to 20 in the process, the setup could become increasingly attractive for long-term buyers.

Alphabet Inc. (GOOGL) Price Chart for Thursday, July, 23, 2026

Patience Is the VariableNothing in these numbers undercuts the long-term case. If anything, an 82% cloud growth rate, a $514 billion backlog, and tripling cloud operating income strengthen it considerably. What changed is the market's willingness to fund the buildout without complaint. Alphabet is telling investors it needs to spend aggressively because it cannot build capacity fast enough to serve the demand in front of it, a message consistent with the $80 billion capital raise in June and the reported development of its Frozen v2 inference chip.

The consensus among 55 analysts remains Moderate Buy with a price target of $415.98, implying roughly 22% upside from recent trading levels. At a forward P/E of 23.86, Alphabet still trades at one of the more reasonable multiples in mega-cap tech.

The question for the second half is simple: how long can the market remain patient as the spending curve steepens? For long-term investors, the underlying business just posted one of its strongest quarters ever, but the near-term tape may need more convincing.

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The U.S. enters a 12th straight day of bombing Iran as pressure mounts to reopen the Strait of Hormuz. Alex Coffey talks about the latest developments as crude oil climbs back to $90 a barrel.

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Alphabet (NASDAQ:GOOG | GOOG Price Prediction) shares are taking several backward steps after reporting some pretty strong quarterly earnings results. Despite the exceptionally strong results, though, the stock took quite a dive in the after-hours session, now off just shy of 3% as of the time of this writing, just a few hours following the big reveal.

It feels like Alphabet is finally on the road to making a profit on its extraordinary CapEx, but that wasn’t quite enough, especially since many investors are still just a bit shocked over the pace of spend, with quarterly CapEx coming in just shy of $45 billion — that’s a lot of money being spent in three short months.

In any case, the cloud is flying higher, and search has continued to prove resilient amid the continued ascent in AI. As a wave of AI agents comes online and constraints are dealt with, perhaps there’s still ample upside for cloud growth. In the meantime, expect shares of Alphabet to be sent to the penalty box for no good reason.

As the valuation starts coming in again and investors look past the incredible innovations, especially on the hardware side, that Google is investing big money into, I do think the window to buy at a meaningful discount has opened.

The company isn’t just scaling up; it’s tackling some very hard problems behind the scenes to get over some of the hurdles (including energy and memory) that rivals in the AI race might stumble into.

Google’s new chip sounds seriously impressive — it’s a real driver that makes recent delays and departures forgivable Take Google’s “Frozen v2” custom AI chip, which is reported by The Information to be 6-10x more efficient. The chip, which is in the works, might just help Google win serious market share as inference hits an inflection point.

Of course, it’s hard to know what to make of the hardware breakthroughs going on behind the scenes, especially following a series of discouraging developments, from big-name AI researchers choosing to leave just a few weeks ago to delays hitting the release of Gemini’s latest Pro model.

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Who would have thought that we’d get Gemini Flash 3.6 before Pro 3.5 landed?

I don’t fault Google for taking its time, especially since it’s looking to raise the bar in the AI race, rather than just keep up. In my view, a month or so difference in release dates isn’t all too meaningful if it means Gemini will be in a spot to top rivals in a range of metrics later on.

At this point in the AI race, it feels like enterprise users are more than willing to make the switch to the very best that’s available if it means getting the upper hand. In that regard, I’d argue it makes less sense to release something that isn’t quite a disruptive force that beckons in customers.

Frozen v2 could set a new high bar for ASICs While it’ll be quite some time before Frozen v2 hits the ground (another two years or so), I do think that it might not take all too long before Gemini packs Pro-level smarts at the speed and cost of its Flash model, especially if Google’s coming ASIC lives up to the hype as “efficiency-maxxing” inference becomes the name of the game.

Whether such unprecedented efficiencies help tear down memory bottlenecks remains the big question. Combined with algorithmic innovations such as TurboQuant, I’d be willing to bet that Google might rise as one of the biggest custom silicon winners.

At the end of the day, Google isn’t just making breakthroughs on the hardware side, but the software side as well. The result may very well be AI compute efficiencies that might be tough to keep up with in this looming “inference explosion” era of the AI revolution.

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PORTLAND, Ore.--(BUSINESS WIRE)--LegitScript, the leader in merchant and product certification and monitoring in the advertising, e-commerce, and payment sectors, today announced an expanded partnership with Google to certify telemedicine providers in Spain. The policy update, which goes into effect on Aug. 5, 2026, allows telemedicine businesses operating in this jurisdiction to apply for LegitScript Healthcare Certification and promote their services on Google advertising platforms. This crea.

Google is letting users sign into their accounts by taking videos of themselves. “Selfie video is a new way to get into your account, giving you more options if you're ever locked out or don't have access to your usual phone or computer,” the tech giant wrote in a Thursday (July 23) blog post.

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SummaryAlphabet remains a Buy ahead of Q2 earnings, supported by improving valuation, positive earnings momentum, and technical strength.Despite lagging in AI performance and recent key talent losses, GOOGL's Gemini models offer industry-leading speed and cost advantages, positioning it to gain Gen AI spend share.Google plus YouTube's ad budget shares are declining, but YouTube's breakout ad conversion rates could offset this budget share erosion, with Q3 likely to reflect these gains.GOOGL's implied 7-year earnings CAGR has moderated to just over 14%, while consensus projects a 20.4% EPS CAGR through FY31, supporting a bullish outlook.From a technical analysis perspective, I have a buy bias so long as the prices sustain above $328. Andrii Yalanskyi/iStock via Getty Images

Performance assessment Alphabet (GOOGL) (GOOG) has underperformed the broader stock market since my last update:

Elevator pitch Alphabet reports Q2 earnings on 22 Jul post-market hours. I am maintaining my bullish bias as we

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SummaryAlphabet raised 2026 AI capex guidance to $195–205 billion as management cited capacity shortages driven by stronger-than-expected customer demand. Google Cloud revenue surged 82% to $24.8 billion, while Cloud backlog reached $514 billion, supporting stronger long-term infrastructure utilization and ROI. Vertical integration across Gemini, TPUs, Cloud and networking enables Alphabet to monetize AI investments across multiple businesses rather than Cloud alone. Despite negative quarterly free cash flow from $44.9 billion of capex, delayed TPU monetization and expanding backlog strengthen the long-term investment thesis. Nikada/iStock via Getty Images

As evident from the latest earning report, Alphabet (GOOG) (GOOGL) continues to increase its investments in AI. This is not a surprise anymore as it is clear for all investors that Alphabet invests

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Alphabet Class A (NASDAQ:GOOGL | GOOGL Price Prediction) and Class C (NASDAQ:GOOG) shares are down 6% in Thursday morning trading, with GOOGL stock at $321.65 and GOOG stock at $320.76. The slide follows Alphabet’s Q2 2026 report, released after Wednesday’s close.

The drop caps a rough week for Alphabet (GOOGL) stock after a 79% one-year run. The broader tape isn’t helping, with the NASDAQ 100 lower by 1.36% this morning.

Capex Guidance Hike Overshadows Cloud Blowout [stock_chart symbol=”NASDAQ:GOOGL”]

Alphabet’s headline numbers were strong. The company’s total revenue reached $119.8 billion, up 24% year over year, while Google Cloud revenue accelerated to $24.77 billion, up 82%. Google noted 950 million monthly active users on Gemini and a Cloud backlog of around $514 billion.

The issue here is spending. Alphabet raised its full-year 2026 capital expenditure guidance to $195 billion to $205 billion, up from $180 billion to $190 billion, and signaled that capex will rise again in 2027. Reported EPS of $9.11 was heavily inflated by a roughly $99 billion equity-securities gain, so this wasn’t a clean operating blowout. Furthermore, Alphabet’s Q2 free cash flow came in at -$5.9 billion.

Analyst Targets Trimmed, Ratings Held Sell-side notes echoed the mixed message. Cantor Fitzgerald lowered its Alphabet (GOOGL) stock price target to $420 from $435, keeping an Overweight rating, citing a strong quarter with Google Cloud Platform outperforming and expanding margins, offset by higher AI infrastructure spending and limited EBIT upside.

Meanwhile, Raymond James cut its GOOG price target to $400 from $425 while maintaining Strong Buy, calling results largely in line, with YouTube and Cloud outperforming and Search slightly weaker. The firm’s focus shifts to Gemini 4 performance and future model development. The pattern is telling: trimmed targets, maintained bullish ratings.

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Peers Drift Lower on Broad Tech Weakness [stock_chart symbol=”NASDAQ:META”]

[stock_chart symbol=”NYSE:SNAP”]

Meta Platforms (NASDAQ:META) stock is down 3% to $610.30, and Snap (NYSE:SNAP) stock is off 1% to $4.43. The moves look more like a function of the down NASDAQ 100 than direct spillover from Alphabet, though sector-wide AI capex anxiety is a shared backdrop. Meta Platforms is itself a heavy AI spender, having raised its 2026 capex guidance to $125 billion to $145 billion.

For diversified exposure to the group, the Global X Social Media ETF (NASDAQ:SOCL) holds Alphabet, Meta Platforms, and Snap. It’s a narrow, single-theme thematic fund heavily weighted toward international social-media names, so an Alphabet-specific move barely nudges the ETF, and concentration risk cuts both ways.

What to Watch The bull case for Alphabet stock still runs through Cloud momentum and Gemini adoption, but the market is repricing how much AI spending it takes to stay ahead. Investors can watch for whether the $322 area holds into the close, and how analysts frame the capex-to-payoff timeline in follow-up notes today.

Investors may consider keeping their position sizes modest here, weighing Cloud and AI momentum against the free-cash-flow impact of accelerating capex. The next test for the AI capex narrative comes when Meta Platforms and other hyperscalers report their own quarters in the days ahead.

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Alphabet delivered another blockbuster quarter for its cloud business, but investors focused instead on the rising cost of the artificial intelligence race.

The Google parent reported record growth in its cloud division and topped Wall Street's revenue expectations, yet shares fell more than 3.5% in premarket trading on Thursday after the company lifted its capital expenditure guidance for 2026 and reported negative free cash flow for the first time in its history.

Alphabet's biggest highlight came from Google Cloud, which posted its strongest quarterly performance on record.

Cloud revenue jumped 82% year over year to $24.8 billion in the quarter ended June, significantly exceeding analysts' expectations for roughly 64% growth, according to LSEG data.

The strong performance reflected robust enterprise demand for AI infrastructure and cloud computing services as companies continue deploying generative AI applications at scale.

Management also said cloud margins expanded during the quarter, while adoption of its Gemini AI models accelerated across enterprise customers.

Overall revenue exceeded Wall Street expectations, although adjusted earnings per share of $2.85 came in just below analysts' consensus estimate of $2.89.

Despite the earnings miss, analysts generally viewed the operating performance as strong, with cloud continuing to emerge as Alphabet's primary growth engine.

However, the positive cloud results were overshadowed by another sharp increase in Alphabet's investment plans.

Chief Financial Officer Anat Ashkenazi told analysts that the company now expects to spend between $195 billion and $205 billion in capital expenditures during 2026, above the previous guidance of $180 billion to $190 billion.

The revised outlook also exceeded analysts' expectations of approximately $188 billion, according to Visible Alpha.

"The increase in the range is primarily due to an acceleration in the delivery of capacity to meet growing demand," Ashkenazi said during the earnings call.

She added that Alphabet remains committed to investing aggressively in infrastructure as long as returns remain attractive.

"We're still in a supply-constrained environment," she said. "I think we've said this now for multiple quarters in a row, and we are seeing very strong demand both from external cloud customers as well as across the business."

The company attributed the higher spending to expanding data center capacity needed to support growing AI workloads and cloud demand.

The scale of Alphabet's investments was also reflected in its cash generation.

The company reported negative free cash flow of $5.9 billion during the quarter, a sharp reversal from nearly $25 billion in free cash flow generated during the same period last year.

Ashkenazi acknowledged that cash generation is likely to remain under pressure.

"We expect the free cash flow will remain under pressure, driven by our investments in technical infrastructure, which enables us to capitalize on the AI opportunity and continue to drive attractive returns," she said.

Bloomberg Intelligence analyst Mandeep Singh said the financial results were difficult to fault operationally but warned that the trajectory of capital spending could leave Alphabet generating negative free cash flow for an extended period.

"Right now they are probably $10-$15 billion free cash flow for this year, next year if this goes to $300 billion there is no way they're going to be positive free cash flow," Singh said on a Bloomberg Podcasts episode.

He added that from this perspective, despite a 24% topline growth, for a company at their scale with negative free cash flow, investors would like to see stronger contributions from Search, YouTube and other businesses rather than relying primarily on cloud growth.

Thomas Monteiro, senior analyst at Investing.com, expressed similar concerns.

"After a negative cash flow quarter, the new raise in capex does not sit well for Alphabet," he said.

"The market's most reliable cash generators are now spending more than they bring in. As long as revenue keeps accelerating, investors will tolerate it. But capital has a real cost again, and the room for error is shrinking every quarter."

AI competition remains intenseWhile GOOG Cloud continues benefiting from the AI boom, Alphabet's own AI products remain under close scrutiny.

The company delayed the launch of Gemini 3.5 Pro earlier this year, allowing rivals such as OpenAI and Anthropic to strengthen their positions in enterprise AI and coding assistants.

Chinese open-source AI models have also intensified competitive pressure.

During the earnings call, analysts repeatedly questioned Chief Executive Sundar Pichai about Google's ability to maintain leadership in frontier AI development.

"There are many attributes on which we are still at the frontier. There are areas where we've acknowledged we need to improve; coding and agentic coding is an example of that," Pichai said.

He added that Alphabet has already begun training Gemini 4 and is directing significant computing resources toward the next-generation model.

Analysts remain optimisticDespite investor concerns over spending, several brokerages maintained bullish views on the stock.

Mizuho said the higher capital expenditure guidance had been largely anticipated and argued the market reaction was surprising given the strength of the cloud business.

"As such, we are surprised the stock is trading off after hours and would expect it to recover in trading tomorrow," the firm wrote, reiterating its Buy rating.

Wolfe Research also reaffirmed its Outperform rating with a $460 price target after increasing its own capital expenditure estimates.

The brokerage expects Alphabet's AI infrastructure investments to continue expanding through 2027, forecasting capital expenditure could rise to around $330 billion as the company builds additional capacity for its Tensor Processing Units (TPUs).

Wolfe estimates Alphabet has already accumulated more than $100 billion in TPU-related sales within its backlog, with most of that revenue expected to begin materialising from 2027 onward as capacity comes online.

Google has been fined a total of €890m (£760m) by the EU for breaches of online competition laws by its search and app store services.

The European Commission, the EU’s executive arm, said Google had broken the Digital Markets Act by giving priority to its own services, such as shopping and hotel deals, in search results over those of its rivals.

It also infringed the DMA by preventing app developers from steering consumers towards cheaper offers, including for subscriptions, on websites or alternative app stores.

Google has been fined €460m for the search-related breach and €430m for the app store violation. The commission has ordered the company to treat third-party services that appear in its search results in a “fair and non-discriminatory manner” and allow app developers to make offers outside Google’s app store.

It noted that Google had already started testing changes to how it displays search results featuring its own services. It said those changes represent “substantial progress towards compliance”.

Consumers will be direct beneficiaries of the decision by the EU, a senior official said. “Research results will be in different in Europe. They will have to adapt their search engine going forward,” they said.

Max von Thun, director of the Open Markets Institute Europe thinktank, said the fines were the “bare minimum” for a company that made revenues of just over $400bn last year.

“Having finally established Google’s non-compliance, the commission must now move quickly to force Google to end its anti-competitive practices once and for all. Europe’s startups and innovators cannot wait much longer,” he said.

The decision to impose the fine risks the ire of Donald Trump, only hours before a series of temporary global tariffs against about 60 countries expires.

A senior official for the EU said they had no knowledge of how Trump was likely to react, insisting that the bloc had the “sovereign right” to regulate US tech companies in its own jurisdiction and that the timing of the fine was not connected to tariffs.

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Last year Apple and Mark Zuckerberg’s Meta were fined under the DMA. Apple was told to pay €500m for anti-competitive practices at its app store and Meta was told to pay €200m in a ruling on its ad-free “consent or pay” proposal for facebook and Instagram.

Google can appeal against the decision and ask for interim measures, including a request to suspend the measure. The search company’s president of global affairs, Kent Walker, described the fine as “product degradation driven by a small group of self-serving complainants” that will have a negative impact on European businesses and consumers.

He argued that the DMA forces Google “to strip away real-time search features Europeans love – like instant pricing and direct availability for hotels, flights, and restaurants – and dismantle safety protections on Google Play”.

SummaryCompaniesGoogle fined €460 million for favouring own servicesAnother €430 million fine for anti-steering restrictionsEU laws must be fully respected, EU antitrust chief saysEU says constructive talks with Google, more fines unlikelyBRUSSELS, July 23 (Reuters) - Alphabet's (GOOGL.O), opens new tab Google was fined a total ​of €890 million ($1 billion) on Thursday for flouting European Union rules aimed at reining in the power of Big Tech, the European Commission ‌said.

However, the U.S. tech giant is likely to avoid fresh fines as EU regulators lauded good progress in its ongoing efforts to comply with the landmark legislation.

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The fines underscored Europe's determination to prevent Big Tech companies from thwarting rivals, defying U.S. criticism and retaliatory tariff threats.

One fine of €460 million was handed out to Google by the European Commission under ​the Digital Markets Act for favouring its own services in shopping, hotels, transport and sports results in search results.

A second fine of €430 million ​targeted Google's restrictions on its app store Google Play preventing app developers from steering users free of charge to cheaper ⁠offers on rival app stores or websites.

Reuters was the first to report on both fines, which are the first for the U.S. tech giant under the DMA ​but the fifth and sixth overall for anti-competitive practices, making for total penalties of €10.38 billion over nearly two decades.

"Our duty and obligation is to comply with ​the laws, that our laws are fully respected," EU antitrust chief Teresa Ribera told reporters when asked about U.S. pushback.

"The DMA is to make sure we have a fair and level playing field. With these decisions we want to make sure there is competition," EU tech chief Henna Virkkunen told reporters.

Google, which has 60 days to comply with the ​Commission's orders to treat rivals in a fair and non-discriminatory manner and to allow app developers to steer users away from its app store, criticised the EU ​findings and said it might take the Commission to court.

"To comply, we are having to strip away real-time Search features Europeans love - like instant pricing and direct availability for hotels, flights, ‌and restaurants - ⁠and dismantle safety protections on Google Play," Google President of Global Affairs Kent Walker said in a statement.

"This isn't fair competition; it's product degradation driven by a small group of self-serving complainants, with European businesses and consumers taking the hit. Regulation should improve products, not make them worse," he said.

MORE FINES UNLIKELY GIVEN 'CONSTRUCTIVE DIALOGUE'The Commission, which acts as the EU competition enforcer, pointed to a "constructive dialogue" with Google and significant progress made to comply with the DMA, indicating that ​daily penalties for non-compliance are likely ​off the table.

"Google has proposed and ⁠started testing changes to how it presents its own services on Google Search for free services such as shopping, hotels and flights," the Commission said, calling it substantial progress.

"The Commission also notes that Google has proposed and started testing changes ​to how it presents shopping ads and content related services, such as sports," it said, adding it would assess ​the changes and continue ⁠talks with Google.

The EU watchdog also said Google may apply the principles of Thursday's decision to its AI-generated summaries known as AI Overviews and AI Mode and that talks would continue to this end.

Google's changes to its steering terms on Google Play received a tentative thumbs up from the Commission.

"These constitute good progress towards ⁠compliance and ​will also be assessed in light of the cease and desist order of today's decision," it ​said.

Europe's crackdown on Big Tech has angered U.S. President Donald Trump's administration, which has threatened to retaliate with tariffs for what he said are moves targeting U.S. companies while U.S. lawmakers have also piled on the pressure.

The fines are ​the third under the DMA after penalties handed out to Apple and Meta Platforms in April last year.

($1 = 0.8763 euros)

Reporting by Foo Yun Chee Editing by Tomasz Janowski

Our Standards: The Thomson Reuters Trust Principles., opens new tab

An agenda-setting and market-moving journalist, Foo Yun Chee is a 21-year veteran at Reuters. Her stories on high profile mergers have pushed up the European telecoms index, lifted companies' shares and helped investors decide on their next move. Her knowledge and experience of European antitrust laws and developments helped her break stories on Microsoft, Google, Amazon, Meta and Apple, numerous market-moving mergers and antitrust investigations. She has previously reported on Greek politics and companies, when Greece's entry into the eurozone meant it punched above its weight on the international stage, as well as on Dutch corporate giants and the quirks of Dutch society and culture that never fail to charm readers.

Alphabet shares pare back overnight as investors scrutinise its ever-increasing capex plans. Tesla is also down after missing on earnings while free cash flow turns negative.

Alphabet's Google has been fined a combined €890 million ($1 billion) by European Union regulators for violating landmark digital competition rules, even as Brussels acknowledged the company has made significant progress toward complying with the bloc's new antitrust framework.

The penalties, announced on Thursday under the Digital Markets Act, target GOOG treatment of rivals in its search engine and app marketplace, reinforcing the EU's determination to curb the market power of large technology companies despite growing political pressure from the United States.

However, the European Commission indicated that Google's recent efforts to modify its products have been constructive, suggesting the company is unlikely to face additional daily fines if it continues on its current compliance path.

The larger of the two penalties, worth €460 million, relates to Google's search engine.

The European Commission said Google unfairly favoured its own services in search results covering shopping, hotels, transport and sports, giving them preferential placement over competing offerings.

A second fine of €430 million concerns Google's Play Store policies, where regulators found the company prevented app developers from directing users, free of charge, to cheaper offers available on rival app stores or external websites.

The Commission said such practices breached the Digital Markets Act, legislation introduced to prevent dominant digital platforms from using their scale to disadvantage competitors.

"Our duty and obligation is to comply with the laws, so that our laws are fully respected," EU antitrust chief Teresa Ribera told reporters.

"The DMA is to make sure we have a fair and level playing field. With these decisions we want to make sure there is competition," EU tech chief Henna Virkkunen added.

Under the DMA, companies can face fines of up to 10% of their annual global turnover for violations.

According to an EU official cited by AFP, Thursday's penalties amount to roughly 0.22% of Google's global revenue.

Google criticised the Commission's findings, arguing that the required changes would ultimately harm consumers and businesses across Europe.

"To comply, we are having to strip away real-time Search features Europeans love - like instant pricing and direct availability for hotels, flights, and restaurants and dismantle safety protections on Google Play," Kent Walker, Google's President of Global Affairs, said in a statement.

"This isn't fair competition; it's product degradation driven by a small group of self-serving complainants, with European businesses and consumers taking the hit. Regulation should improve products, not make them worse."

The company has 60 days to comply with the Commission's cease-and-desist orders and said it is considering challenging the decision in court.

Despite the fines, the Commission struck a noticeably more conciliatory tone regarding Google's ongoing compliance efforts.

Officials pointed to what they described as a "constructive dialogue" with the company and highlighted meaningful progress in adapting several of its services to satisfy the DMA.

Google has already begun testing changes to how it displays its own shopping, hotel and flight services within Search, while also experimenting with modifications to shopping advertisements and sports-related content.

"The Commission also notes that Google has proposed and started testing changes to how it presents shopping ads and content-related services, such as sports," the regulator said.

It added that these changes will continue to be assessed through ongoing discussions with the company.

The Commission also indicated that the principles established in Thursday's decision could eventually apply to Google's AI-generated search products, including AI Overviews and AI Mode.

Separately, regulators said Google's revised steering rules for Play Store developers appear to represent "good progress towards compliance" and will also be evaluated further.

The comments suggest Brussels is unlikely to pursue additional financial penalties if Google continues implementing the required changes.

EU maintains pressure despite US criticismThe latest action highlights Europe's continued willingness to enforce its digital competition rules despite criticism from Washington.

The fines arrive just days before the first anniversary of a tariff agreement between the United States and the European Union that helped ease broader trade tensions.

US President Donald Trump's administration has repeatedly accused Brussels of unfairly targeting American technology companies and has threatened retaliatory tariffs over European digital regulation.

European officials, however, dismissed suggestions that geopolitical pressure would influence enforcement.

Ribera said the Commission's responsibility is "to ensure that the regulation that is being adopted by our sovereign institutions is fully enforced and respected."

She also noted that similar antitrust cases are being pursued in the United States, arguing that American regulators are addressing comparable competitive concerns.

The latest penalties mark the third major enforcement action under the Digital Markets Act after fines imposed on Apple and Meta Platforms last year.

Google has also faced a series of earlier EU antitrust cases.

Between 2017 and 2019, the company was fined a combined €8.2 billion under previous competition rules.

Last year, Brussels imposed another €2.95 billion penalty in a separate antitrust case, prompting renewed criticism from the Trump administration.