Alphabet Inc's Q2 net income swells 298%; expects AI expenditure to increase up to $205 billion; shares end in red

Alphabet Inc, parent company of Google, announced its Q2 2026 earnings during post-market hours on Wednesday, late overnight. The company posted consistent earnings growth across major parameters. Ahead of the quarterly results, shares of Alphabet closed 1.4% lower at $342 per share.

The company’s press release for Q2 earnings said, “Consolidated Alphabet revenues increased 24%, or 23% in constant currency, to $119.8 billion, reflecting strong performance across the business and our 12th consecutive quarter of double-digit revenue growth”.

The revenue growth was primarily led by Google Services, whose revenue jumped 15% to $94.5 billion, led by 17% growth in Google Search, 15% in Google subscriptions and 13% in YouTube ads.

The Google Cloud business witnessed a sharp rise in revenue at 82% YoY at $24.7 billion for Q2 as compared to $13.6 billion in the same quarter. Similarly, the operating margins for the cloud business expanded nearly 1500 bps to 35.6% from 20.7% in the previous year.

The consolidated operating income surged 30%, and the operating margin expanded 200 bps to 34%. Lastly, the net income increased 298%, and the EPS stood at $9.11 per share for the quarter. The company also recorded unrealised $98 billion in equity gains during the quarter, which helped the net income swell 3x.

Sundar Pichai, CEO of Google and Alphabet, said: “Our AI investments are redefining what’s possible across every part of our business. 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.

He further added, “These outstanding results show that our differentiated, full-stack approach to AI is delivering real, measurable value for consumers, customers, and our partners globally.”

AI expenditure jumps

During the post-earnings call, Google announced an expansion in its AI-related expenditure from $195 billion earlier to $205 billion. The latest expenditure number is sharply higher than previous guidance of $180-$190 billion as the company witnesses a supply-demand gap in AI computing demand. Investors remain cautiously optimistic on the increased expenditure despite blockbuster results.