Alphabet holds near $345 as Q2 cloud revenue surges 82%

Alphabet reported Q2 2026 revenue of $119.8 billion, up 24 percent year over year, beating consensus estimates near $117 billion, as Google Cloud revenue surged 82 percent to $24.8 billion.

Rakuten Securities' segment analysis shows Google Cloud operating income more than tripled to $8.8 billion in Q2 2026, with operating margin expanding to 35.6 percent from 20.7 percent a year earlier. Google Services, which includes search and YouTube ads, generated $94.54 billion in revenue, up 14.5 percent, with operating income of $39.54 billion, up 19.6 percent year over year. Google Search revenue grew 17 percent to $63.3 billion, moderating from 19 percent growth in Q1 2026 but still on a multi-quarter acceleration path.

Alphabet raised full-year 2026 capital expenditure guidance to $195 billion to $205 billion, up from a prior range of $180 billion to $190 billion. Q2 CapEx reached $44.9 billion, roughly double the prior-year level, pushing free cash flow to negative $5.9 billion for the quarter. The company began recognizing revenue from selling its TPU systems into customer data centers for the first time in Q2 2026, creating a new hardware-and-services revenue stream that could offset part of the heavy spending over time.

Shares closed at $344.59 on Aug. 24, up 0.83 percent, with a market capitalization above $4.1 trillion. The stock has gained more than 60 percent over 12 months but sits 14 percent below its May 2026 high near $402. Consensus price targets average $419.86, implying about 22 percent upside, according to market data compiled by StockInvest.us. The stock found support near $320, aligned with its 200-day moving average, after a pullback from the May peak. Alphabet's forward P/E near 17.3 screens cheaper than the broader S&P 500 and several mega-cap peers including Meta and Tesla.

GAAP net income of $112.1 billion and EPS of $9.11 were inflated by roughly $98 billion of unrealized gains on equity holdings in the quarter, far above consensus EPS estimates near $2.90. Total backlog reached $514 billion, with management expecting more than half to convert to revenue within 24 months. Alphabet pays a quarterly dividend of $0.22 per share, with an ex-dividend date of Sept. 4, equating to a yield of about 0.3 percent.

The raised CapEx guidance shows management expects AI infrastructure demand to accelerate. Investors will watch the Q3 earnings call on Oct. 28 for updated segment margins and cloud growth trajectory.

This article is for informational purposes only and does not constitute investment advice.