Alphabet (GOOGL) Q2 2026 Earnings Review

Alphabet (GOOGL) Q2 2026 Earnings Review

Bradley Freeman

9 min read

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Earnings Season Sale

Table of Contents

    a. Key Points

    • Strong cloud quarter led by AI.
    • Raised 2026 CapEx guidance.
    • Leadership is increasingly confident in AI CapEx return on investment (ROI).
    • The search business continues to be greatly helped by AI.

    b. Demand

    • Beat revenue estimates by 2.3%. The company impressively delivered 23% Y/Y constant currency (CC) growth compared to 19% CC growth last quarter and 13% CC growth last year. This is mostly related to cloud, although search did show a nice 5-point growth acceleration compared to Q2 2025 as well.
    • Met search revenue estimates. 
    • Beat YouTube revenue estimates by 2.3%. 
    • Beat cloud revenue estimates by 10.7%. The cloud backlog reached $514B compared to $106B last year and $462B last quarter. 
      • A little over $250B will be recognized in the next 8 quarters.
      • Roughly 40% of the backlog is from Anthropic.

    c. Profits & Margins

    • Beat EBIT estimates by 1%. EBIT rose by 30% Y/Y.
      • Operating expenses rose by 27% Y/Y due to 32% Y/Y R&D cost growth via AI talent and more data center depreciation.
    • Crushed EPS estimates, but that was all related to SpaceX and Anthropic gains. EPS was $2.86 vs. $2.90 estimates and rose by 23% Y/Y excluding this help.
    • Missed $46B operating cash flow estimates by $7B.
    • Missed $3B FCF estimates by $8B. $44.9B in capital expenditures (CapEx) was $4.5B larger than expected.

    d. Balance Sheet

    • $240B cash, equivalents & marketable securities.
    • $98B debt. It issued $20B in unsecured notes during the quarter.
    • 1% Y/Y dilution. It issued over $80B in equity last month including a $40B at-the-market program (draw-down as you want to) that they have not begun using yet. This facility is to cover tax liabilities from stock-based compensation. They do not anticipate more equity raises in the immediate future.

    e. Guidance & Valuation