Alphabet Cloud Surges 82%, Capex Doubles to $44.9B
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- Alphabet reported Q2 revenue of $119.80 billion, beating the $116.93 billion LSEG estimate, though adjusted EPS of $2.85 missed the $2.89 consensus and search revenue grew 17%, in line with expectations
- Google cloud revenue surged 82% year-over-year to $24.8 billion, the standout beat in the report, while capex roughly doubled to $44.9 billion with about 60% going to servers and 40% to data centers and networking
- Alphabet booked a $99.03 billion gain on equity securities tied to its stakes in Anthropic and SpaceX, the primary driver behind a 298% year-over-year jump in quarterly profit to $112.11 billion
- YouTube advertising revenue rose 13% to about $11.06 billion, topping the $10.81 billion StreetAccount estimate, and CEO Sundar Pichai credited the FIFA World Cup with driving record search usage and 1.7 billion unique World Cup-related YouTube viewers
- Antigravity, Google's AI coding tool, now has 2.4 million weekly active users across its free, $19.99 Pro and $99.99 Ultra tiers, though Pichai did not disclose how many are paying
- Alphabet shares were flat in after-hours trading despite the cloud beat, with Deepwater's Gene Munster attributing the muted reaction to a search margin miss and Google's position as the first major test this season of the ballooning-capex AI trade
Why it matters: Alphabet's quarter is the season's first major litmus test for whether Big Tech's doubling AI infrastructure spending can be sustained by cloud and search growth — cloud did its job at +82%, but FactSet expects $187.1 billion in 2026 Alphabet capex alone, and the stock's flat after-hours reaction signals investors want proof that the $44.9 billion quarterly spend translates into sustained revenue, not just one-time paper gains from Anthropic and SpaceX equity stakes.
