Alphabet Inc. (NASDAQ: GOOGL) reported record Q2 2026 earnings on Wednesday, revealing total revenue of $119.8 billion, a 24% increase from $96.4 billion a year prior, exceeding analyst expectations of $116.93 billion. Google Cloud revenue surged 82% to $24.8 billion, significantly above the expected $22.3 billion, while operating income reached $40.77 billion, resulting in a 34% operating margin.
Despite these strong numbers, the company’s stock fell in after-hours trading due to concerns over rising capital expenditures, which doubled year-over-year to $44.9 billion, resulting in a negative free cash flow of $5.86 billion. The market reacted critically to these spending increases amidst aggressive investments in AI and cloud infrastructure, despite a 298% year-over-year increase in net income to $112.1 billion, largely driven by unrealized gains from equity securities.
Analysts maintain a Moderate Buy rating with a price target of $415.98, suggesting a potential upside of 22%. Key to investor sentiment will be how long the market can tolerate increased capital expenditures against the backdrop of otherwise strong operational performance.
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