Alphabet cloud revenue jumps 82% as AI demand lifts Q2 earnings

Alphabet reported Q2 revenue of $119.8 billion, up 24%, as Google Cloud revenue jumped 82% to $24.77 billion.

"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," Chief Executive Sundar Pichai said.

Operating income rose 30% to $40.8 billion, expanding the operating margin by two percentage points to 34%. Diluted earnings per share reached $9.11, boosted by $98 billion in other income from unrealized equity securities gains; the adjusted figure aligned closely with consensus before that one-time gain. Google Cloud operating income more than tripled to $8.8 billion, with the segment's margin widening from 21% to 36%.

Metric	Actual	Consensus	Beat/Miss
Revenue	$119.8B	—	+24% YoY
Cloud revenue	$24.77B	$22.4B	+10.6%
Operating margin	34%	—	+2pts

Shares trade in the mid-$340 range, down from a 52-week high of $404.44, after Alphabet lost more than $700 billion in market value as investors reassess its AI edge. The stock remains up 65% over the past year, with a market capitalization of $4.2 trillion.

Google Services revenue rose 15% to $94.5 billion, with search and other revenue up 17% to $63.27 billion and YouTube advertising up 13% to $11.06 billion. Total Google advertising revenue grew 14.4% to $81.63 billion.

The company raised its 2026 capital expenditure outlook to $195 billion to $205 billion to fund AI infrastructure. Q2 capex reached $44.92 billion, and free cash flow swung to negative $5.86 billion. Long-term debt climbed to $98.2 billion from $46.5 billion, and Alphabet suspended buybacks in the first half of 2026 after spending $28.3 billion the prior year. The company is selling $85 billion of new stock and will pay a $0.22 dividend on Sept. 14.

Google Cloud's $514 billion backlog, with more than half expected to convert within two years, provides revenue visibility. Nearly 90% of the Fortune 100 use Gemini Enterprise, and Gemini processes 22 billion API tokens per minute.

The cloud acceleration outpaces rivals, according to a Yahoo Finance comparison of the two companies' Q2 results: Microsoft's Azure grew 43% and Amazon's AWS 37% in the same quarter, with AWS posting $42.2 billion in revenue and a $496 billion backlog. Alphabet trades at 17 times trailing earnings, below Microsoft and Amazon, despite the stronger one-year share gain.

The higher guidance shows management expects AI demand to keep accelerating, but the $700 billion market-value decline shows investors are weighing capital intensity against growth. The next test is the Q3 earnings call, where segment margins and capex execution will determine whether the stock holds above $340.

This article is for informational purposes only and does not constitute investment advice.