Alphabet delivered one of the strongest AI-driven quarters in its history after the close on July 22 — and got punished for what it will spend next. Q2 revenue climbed 24% year over year to $119.8 billion, well ahead of estimates, while shares fell roughly 4% in extended trading.
Cloud goes vertical
Google Cloud revenue surged 82% to $24.8 billion, crushing the ~$22.3 billion consensus, with cloud operating income at $8.8 billion versus $2.8 billion a year ago. The backlog tells the sharper story: up roughly $50 billion in a single quarter to $514 billion in contracted future revenue.
The price tag
Quarterly capital spending hit a record $44.9 billion — roughly double a year ago — dragging free cash flow to negative $5.9 billion, reportedly the first negative quarter since Alphabet went public. Full-year capex guidance rose again, from $180-190 billion to $195-205 billion, and management flagged a "significant increase" for 2027, including leased third-party capacity as a bridge.
Gemini's scale
CEO Sundar Pichai said the Gemini app has reached 950 million monthly active users, AI Mode in Search has passed 1 billion, and Google's APIs now process 22 billion tokens per minute.
The market's verdict
Reported net income of $112.1 billion was inflated by roughly $98 billion in one-time equity gains, so investors looked past it — and focused on the capex line instead. The sell-off echoes the reaction to Meta and Microsoft raises earlier this year: growth is no longer the question; the cost of sustaining it is.