Alphabet is set to report second-quarter 2026 earnings on July 22 after market close, with investors closely watching whether the company’s record capital spending on AI infrastructure is beginning to translate into revenue growth that justifies the massive outlays.
The Google parent raised its 2026 capex guidance to $180 billion to $190 billion in April, more than double the prior year’s spending, according to Reuters and TechCrunch. The company has also raised $80 billion in equity capital to fund the AI buildout, signaling the scale of its commitment to infrastructure expansion.
Google Cloud remains the earnings highlight. In Q1 2026, the cloud division grew 63% year-over-year to $20 billion in revenue—the fastest growth rate among major cloud service providers—with operating margin expanding sharply to a record 32.9%, according to IG. Analysts tracked by IG expect Google Cloud to maintain roughly 63% growth in Q2, with total revenue projected to reach $116.8 billion, up 21.1% year-over-year.
Yet the massive capex spending has drawn investor scrutiny. According to Wedbush Securities, investors entering Q2 earnings season are focused on whether heavy AI spending will translate into stronger revenue growth. Wedbush noted that recent weakness in large-cap tech stocks reflects growing concerns over the timing of returns from record AI infrastructure investments, as the $700 billion in Big Tech capex this year fuels the AI buildout without yet delivering clear monetization.
Reuters reported in February that a planned $600 billion artificial intelligence spending splurge by big tech firms in 2026 is adding to investor unease as they assess the return on those investments. The scrutiny intensified as companies like Microsoft and Meta continue investing heavily while waiting for broader monetization of AI initiatives.
Free cash flow presents another concern. IG reported that Alphabet’s free cash flow fell 47% year-over-year in Q1 2026, even as capex rose 107% to $35.7 billion in a single quarter. That compression—and any early guidance on 2027 capex scale—is flagged as a key risk to watch in the earnings call.
On the positive side, analyst sentiment remains broadly bullish. Of 33 analysts tracked by TipRanks, 28 carry a ‘buy’ rating ahead of the earnings, with an average 12-month price target of $428.43 implying 15.5% upside. Options markets are pricing in a 5.3% expected move into the July 22 report, according to IG.
What Investors Will Watch
Analysts will press management on whether Google Cloud can sustain its growth crown as new entrants emerge. Meta recently announced ‘Meta Compute,’ signaling a future competitor to Google Cloud and AWS. Forward guidance on the sustainability of Google Cloud’s 63% growth pace will shape the leadership narrative, IG noted.
A second focus is whether Alphabet’s custom AI chips—Tensor Processing Units (TPUs)—are converting into actual revenue. Alphabet is commercializing TPUs by selling capacity directly to external cloud providers and preparing a Blackstone-backed neo-cloud venture that will rent TPU compute directly to AI labs and enterprises from 2027. Management has guided that hardware sales will begin contributing later in 2026, with the bulk landing in 2027, according to IG.
Finally, investors want clarity on Gemini’s progress. Google’s model family has closed the perception gap with OpenAI and Claude over the past two quarters, and the scheduled July 17 launch of Gemini 3.5 Pro gives management fresh data to reference. Usage metrics—Gemini app monthly active users, API adoption, and enterprise deals—will be scrutinized as proof that momentum is translating into share gained from rivals.
Sources
- IG — Q1 2026 earnings recap, Q2 2026 analyst expectations, Google Cloud growth figures, capex guidance, free cash flow decline, analyst sentiment
- Reuters — Alphabet capex guidance increase to $180-190 billion, Big Tech $600 billion AI spending and investor concerns
- TechCrunch — Alphabet capex guidance and AI infrastructure spending
- Wedbush Securities (via Yahoo Finance) — Investor scrutiny over AI spending ROI, $700 billion Big Tech capex, timing of monetization concerns
- TipRanks — Analyst ratings and price targets ahead of earnings
