Alphabet reported stronger-than-expected second-quarter results on Wednesday, driven by rapid growth in its cloud business, but Class A shares fell 3.2% in extended trading after the Google parent lifted its 2026 capital expenditure forecast as it accelerates investment in artificial intelligence infrastructure.
The company reported earnings per share of US$9.11, well ahead of expectations for $2.88, while revenue rose to $119.8 billion, beating the $117.07 billion expected.
Growth was supported by an 82% surge in Google Cloud revenue as businesses continued increasing AI-related spending.
However, investors focused on Alphabet's higher spending outlook. The company now expects 2026 capital expenditure of $195 billion to $205 billion, up from its previous forecast of $180 billion to $190 billion.
Finance chief Anat Ashkenazi said demand for AI computing capacity continues to outstrip supply.
“We’re still in a supply-constrained environment. I think we’ve said this now for multiple quarters in a row, and we are seeing very strong demand both from external cloud customers as well as across the business.”
Alphabet said its Gemini application now has 950 million monthly active users and is capable of processing 22 billion tokens per minute as competition in generative AI continues to intensify.
The company has also faced growing competition from lower-cost Chinese open-weight AI models as businesses seek to reduce inference costs.
Google recently introduced three lower-priced Gemini models following reports earlier this month that it had delayed the launch of its Gemini 3.5 Pro model.
Chief Executive Sundar Pichai said Gemini 3.5 Pro remains in testing while Alphabet is already investing computing resources into Gemini 4 to compete with frontier AI developers including Anthropic and OpenAI.
Ashkenazi said the higher spending guidance reflects continued strong customer demand.
“The increase in the range is primarily due to an acceleration in the delivery of capacity to meet growing demand.”
Alphabet reported $44.9 billion in capital expenditure during the second quarter, broadly in line with estimates of $44.8 billion. Capital spending doubled from a year earlier.
Meanwhile, Google's core Search business continued to expand, with revenue rising 17% year-on-year to $63.3 billion, narrowly missing expectations of $63.4 billion.
