Report Date: July 22, 2026 (after market close) | Call: July 22, 2026, 2026Q2 Earnings Call
Alphabet heads into tomorrow's report as one of the most closely watched names of this earnings season, given its position at the center of the AI capex debate. The stock is up modestly on the year but has been volatile: shares touched an all-time high near $400 in early May before sliding roughly 13% into the print amid AI-model competition worries and capex anxiety. As of July 13, Alphabet's Google stock was up 14% in 2026 to $355.67 but had declined 6.5% since the end of May, and shares have drifted further to the $347–352 range in the days immediately before earnings, with two separate sessions last week (July 16–17) seeing drops of 4% and 2.3% respectively on AI-related headlines.
Sentiment heading in is mixed-to-constructive: sentiment is mostly sanguine, with investors still considering Google an AI leader thanks to Gemini and TPU, and the core search business remaining robust, though there is nervousness about the frontier model pecking order, as Gemini has lost momentum since its November launch, and reports indicate Gemini 3.5 Pro is delayed due to underwhelming internal testing performance.
Alphabet's Q1 2026 print was a blowout that set a high bar. Per CFO Anat Ashkenazi, the company delivered its 11th consecutive quarter of double-digit revenue growth, with consolidated revenue reaching $109.9 billion, up 22% or 19% in constant currency. Profitability surged as operating income increased 30% to $39.7 billion with a 36.1% operating margin, while net income increased 81% to $62.6 billion and EPS increased 82% to $5.11 (helped by unrealized gains on equity holdings).
Segment highlights: - Search: Search & other revenue grew 19%, with AI experiences like AI Mode and AI Overviews driving people back to search more. - Cloud: The standout segment. Cloud accelerated again due to strong demand for AI products and infrastructure, with revenue growing 63% and exceeding $20 billion for the first time, while backlog nearly doubled quarter-on-quarter to over $460 billion. More precisely, Cloud revenues were up 63% to $20 billion, operating income tripled year-over-year with margin expanding from 17.8% to 32.9%, and backlog nearly doubled sequentially to $462 billion. - Capex: Management already raised guidance once this year — full-year 2026 CapEx guidance was updated to $180 billion to $190 billion, up from a previous $175 billion to $185 billion, partly to include the Intersect acquisition — and flagged more to come: seeing unprecedented internal and external demand for AI compute resources, management said it expects 2027 CapEx to significantly increase compared to 2026.
Consensus (per compiled sell-side estimates) calls for EPS of roughly $2.86–$2.95 and revenue of approximately $116.8 billion–$120.2 billion, implying continued double-digit top-line growth. Analysts will be parsing three numbers closely: 1. Google Cloud growth — the Street is looking for cloud revenue growth in the neighborhood of 55–63% y/y, with operating margin expected to expand further from last year's ~24% base. 2. Search & advertising trends — whether AI Overviews/AI Mode monetization and query growth continue to offset any "traffic diversion" fears. 3. Capex commentary — any incremental detail on the shape of the "significant increase" flagged for 2027 CapEx.
Nearly every preview note over the past week has zeroed in on spending. Analyst expectations for the earnings call include discussion of software and cloud growth, though focus is expected to center on the company's capital expenditure number. The market's reaction function has become asymmetric: strong cloud growth may not matter if capex guidance jumps again without a commensurate margin/ROIC story attached. As Barron's put it heading into the print, if Alphabet raises expected spending on AI infrastructure without being able to back it up with performance, an ugly reaction is expected.
The most negative headline of the past two weeks has been the delayed flagship model. Alphabet's Google is months behind schedule on delivering Gemini 3.5 Pro, its most powerful flagship AI model, with the delay stemming from the product disappointing on certain internal tests, including writing code, raising the risk of the firm falling further behind Anthropic and OpenAI. Compounding this, China's Moonshot AI claimed its Kimi K3 model could outperform some cutting-edge U.S. systems, with initial results from Artificial Analysis showing K3 ahead of all Google models in an intelligence ranking. Investors will want color from Sundar Pichai on the Pro timeline and whether the newly released Gemini 3.6 Flash / 3.5 Flash-Lite / Flash Cyber lineup — launched just this week — is enough to hold the line competitively. Notably, the July launch does not include the long-anticipated update to Google's flagship model, Gemini Pro, which was last updated in February, though DeepMind's Logan Kilpatrick has said Pro testing with partners continues and the team has begun pre-training for Gemini 4.
Just before earnings, reports of a new in-house AI chip gave the stock a lift. Alphabet is designing a new server chip internally dubbed "Frozen v2," slated for release around 2028, that could be six to ten times more efficient than Google's existing AI chips measured by tokens generated per unit of power, which appeared to assuage investors, with the stock climbing roughly 3% following the report. This plays directly into the bull case that Google's vertically integrated stack (TPUs, custom silicon, in-house models) gives it a structural cost advantage over GPU-dependent peers — a point management has emphasized repeatedly, including Sundar Pichai's Q1 comments that Google is "the only provider in the market that offers all of these in a vertical stack."
Despite worries that chatbots are cannibalizing search traffic, recent data has been reassuring. Global web visits to Google rose 4% year-over-year in June to 2.8 billion, and global daily average mobile users increased 12% year-over-year — growth that occurred despite a 736% jump in traffic to Anthropic's Claude and a 98% rise for Meta AI. Notably, Gemini's own web traffic quadrupled over the past year while daily mobile users climbed 295%, gaining share from ChatGPT. BofA's Justin Post highlighted this dynamic, noting "Google's recent comments on expansionary moment for Search could suggest potential for continued strength in 2026" and "potential for upside to Street search estimates" given stable traffic and strong eCommerce volumes, and BofA has a Buy rating with a $430 price target.
Regulatory noise has picked up materially this month. The EU ordered Google to open Android to rival AI assistants — Europe ordered Google to make it easier for users of its Android phones to summon help from AI assistants made by competitors, a move designed to help other companies compete with Google's commanding position in the European smartphone market, with Google's Kent Walker warning "This Android ruling threatens device security by granting external apps sensitive and powerful device permissions without these safeguards." Separately, Google faces new EU fines and a fresh publisher copyright lawsuit over Gemini training data, and the DOJ/state AGs are appealing the search-remedies ruling from the 2024 antitrust case. None of these are likely to move Q2 numbers directly, but they remain a persistent tail risk analysts may probe on the call.
On the positive side, Berkshire Hathaway's continued buying has been a notable sentiment support. Warren Buffett disclosed that he initiated Berkshire Hathaway's investment in Alphabet, first disclosed in Q3 2025, and has dramatically increased it since, including an additional $10 billion invested through a private stock purchase last month.
Waymo remains a bright spot operationally — the robotaxi unit continues its city expansion (San Diego, Las Vegas, Tampa, Denver added recently) and had already surpassed 500,000 fully autonomous rides per week as of Q1, having doubled in under a year. Investors will want an update on Other Bets losses and the timeline for further deconsolidations (GFiber/Astound expected to close in Q4).
Bull case: Cloud growth stays near/above 60% with backlog continuing to climb, capex guidance is reiterated (not raised further) or framed with credible ROIC commentary, Search/ads hold double-digit growth with no signs of AI-driven traffic erosion, and management gives a confident, dated update on Gemini 3.5 Pro's rollout to quiet competitive fears.
Bear case: Another capex guidance hike without matching backlog/margin proof points, cloud deceleration, free cash flow continuing to compress (it fell sharply y/y in Q1 to $10.1 billion) as depreciation ramps, and continued ambiguity on the Gemini Pro timeline feeding the "losing the model race" narrative — especially with competitive model releases from OpenAI, Anthropic, Meta, and now Moonshot's Kimi K3 all landing in recent weeks.
Given the stock's ~13% pullback from May highs, expectations have already been reset somewhat lower on the AI-model-competition narrative, which could set up for relief if cloud and search numbers simply beat and capex guidance is left unchanged. The capex number and any language on 2027 spending will likely be the single most important data point on the call, ahead of even the Search/Cloud growth rates themselves.