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Earnings analysis · 10-Q

GOOGL earnings analysis

Filed July 23, 2026 · Our reading of the company's report

The latest report

Alphabet delivered strong operating results, with Q2 revenue up 24% to $119.796 billion, operating income up 30% to $40.770 billion, and Google Cloud revenue up 82% to $24.768 billion. However, reported EPS of $9.11 was…

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Alphabet delivered strong operating results, with Q2 revenue up 24% to $119.796 billion, operating income up 30% to $40.770 billion, and Google Cloud revenue up 82% to $24.768 billion. However, reported EPS of $9.11 was heavily driven by a $99.031 billion equity-security gain rather than recurring operations. The central investor trade-off is powerful AI/cloud growth against an exceptionally aggressive infrastructure buildout: $44.9 billion of quarterly capex exceeded $39.1 billion of operating cash flow, while financing, contractual commitments and dilution capacity expanded materially.

Read the original on SEC.gov

From revenue to operating profit

Where each $100 of revenue went in this report.

Of every $100 of revenue Cost of sales $38 Operating expenses $28 Left as operating profit $34

Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.

Where revenue came from

The business segments reported by the company.

Google Services revenue 79.0% Google Cloud revenue 20.7% Other Bets revenue 0.3%

Shares of the segments disclosed in this filing, largest first.

Reported figures

Earnings per share
$9.11

What stood out

  • Revenue growth accelerated with margin expansion

    Q2 revenue rose 24% YoY to $119.796 billion from $96.428 billion; it also increased $9.900 billion from the implied Q1 level, based on $229.692 billion of six-month revenue. Gross margin expanded to 62% from 59%, while operating margin improved to 34% from 32%.

  • Cloud growth and profitability surged

    Google Cloud revenue surged 82% YoY to $24.768 billion from $13.624 billion, and segment operating income rose to $8.814 billion from $2.826 billion. Growth was led by Cloud Platform infrastructure and platform services, with TPU-system revenue beginning in Q2.

  • Core Google franchises remained strong

    Google Services revenue increased 15% YoY to $94.540 billion. Search & other grew $9.081 billion to $63.271 billion, YouTube ads rose $1.259 billion to $11.055 billion, and subscriptions, platforms and devices increased $1.708 billion to $12.911 billion.

  • Operating leverage despite AI investment

    Operating income climbed 30% YoY to $40.770 billion from $31.271 billion. Search paid clicks grew 13% and cost-per-click increased 3%; the TAC rate declined to 19.8% from 20.6%.

  • EPS includes a substantial investment-gain windfall

    Diluted EPS was $9.11 versus $2.31 a year earlier, but the majority of the increase was non-operating: other income was $97.983 billion, including $99.031 billion of equity-security gains, primarily from SpaceX and a private company.

  • Strong liquidity supports infrastructure buildout

    Liquidity remained substantial at $242.5 billion of cash, cash equivalents and short-term marketable securities. Six-month operating cash flow rose to $84.859 billion from $63.897 billion, supporting elevated infrastructure spending.

What to watch

  • Capex intensity has turned free cash flow negative

    AI infrastructure investment materially exceeded internally generated quarterly cash: Q2 capex was $44.9 billion versus operating cash flow of $39.1 billion, implying approximately negative $5.8 billion of free cash flow. Six-month capex more than doubled to $80.6 billion from $39.6 billion, and management expects a significant further increase in 2026 versus 2025.

  • Large compute commitments heighten execution risk

    The updated risk factors cite large, long-duration AI and TPU commitments that could create excess capacity or counterparty exposure. Contractual obligations totaled $811.0 billion, including $200.7 billion short term; uncommenced data-center leases totaled $85.2 billion and potential future infrastructure backstops were $24.1 billion.

  • Funding strategy raises leverage and dilution risk

    Alphabet added financing and dilution risk disclosures after issuing $49.6 billion of equity and mandatory convertible preferred stock proceeds and $20.3 billion of senior notes in Q2. It also retains a $40.0 billion ATM capacity, while long-term debt carrying value reached $98.2 billion.

  • Network advertising and Other Bets remain drags

    Google Network revenue declined $51 million YoY to $7.303 billion as AdSense fell, despite a 13% increase in cost per impression. Other Bets' operating loss widened to $1.799 billion from $1.246 billion.

  • Regulatory and litigation obligations remain sizable

    Legal and regulatory exposure remains material: Alphabet accrued $2.1 billion for the PriceRunner matter, held $17.4 billion of short-term legal and regulatory accruals, and paid a previously accrued $5.2 billion Android-related EC fine in July 2026.

Management's outlook

The 10-Q provided no numeric revenue or EPS outlook. Management expects to significantly increase 2026 technical-infrastructure investment relative to 2025 and expects existing liquidity to fund operations and commitments for at least the next 12 months.

This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.