Alphabet (GOOGL) reported second-quarter 2026 earnings after the market close on Wednesday, posting results that exceeded analyst expectations on revenue and earnings per share, while also raising its capital spending outlook for the year.

The company reported revenue of $119.80 billion for Q2, up 24.2% year over year and ahead of analyst estimates of $116.53 billion. Earnings per share came in at $9.11, well above the consensus estimate of $2.87.

Despite the stronger-than-expected headline figures, GOOGL stock fell around 7% after the report. The shares are now trading roughly 20% below their recent all-time high.

The decline followed Alphabet’s decision to lift its 2026 capital expenditure forecast to a range of $195 billion to $205 billion, compared with previous guidance of $180 billion to $190 billion. The updated forecast comes after the company spent $91 billion last year, underscoring how quickly large technology companies are scaling infrastructure for AI workloads, including data centers, servers, and advanced chips.

Google Search delivered its strongest quarter on record, generating $63.3 billion in revenue, an increase of 17% from a year earlier. The company said AI features, including AI Overviews and AI Mode, are contributing to higher search activity. AI Mode has already reached 1 billion monthly active users globally.

Google Cloud was another major contributor, with revenue rising 82% to $24.8 billion. The platform’s order backlog stood at $514 billion as of June 30, representing a $50 billion increase from the first quarter alone. Cloud demand is a key part of the spending debate because the same AI infrastructure that requires heavy upfront investment can also support enterprise customers using computing capacity, storage, and machine-learning tools.

Capital Spending Concerns Follow Earnings Beat

Alphabet’s higher spending plans drew attention because investments in data centers and chips are depreciated over time rather than expensed immediately. As a result, the company’s current spending commitments are expected to affect profits over multiple years.

Alphabet also reported negative free cash flow of $5.8 billion in Q2 after excluding a $98 billion increase in the value of its investment holdings in companies such as Anthropic and SpaceX.

That investment gain contributed to the elevated headline EPS figure. Excluding it, the company’s underlying cash position appeared weaker than the earnings number suggested. For investors following Alphabet’s operating performance, the distinction matters because accounting gains on investment holdings can lift reported earnings without adding the same amount of cash from the company’s core businesses.

Analysts Maintain Positive Ratings After Stock Drop

Wall Street analysts largely maintained positive views on Alphabet following the report. Royal Bank of Canada kept its buy rating and a $475 price target. Cantor Fitzgerald reiterated its overweight rating but lowered its price target to $420 from $435. Freedom Capital upgraded the stock to strong buy.

The average analyst price target is $410.09. The stock has 30 buy ratings, 6 strong buy ratings, and 3 hold ratings.

Alphabet also announced a quarterly dividend of $0.22 per share, payable September 14 to shareholders of record as of September 7.

Separately, Alphabet was hit with an EU antitrust fine of approximately $1 billion, adding another regulatory issue during the week. Regulatory scrutiny remains relevant for Alphabet because its largest businesses include search, advertising, and digital platforms that have drawn attention from competition authorities in multiple jurisdictions.

Insiders have sold $7.67 million worth of stock over the past 90 days, including sales by CAO Marsida Saraci and Director John L. Hennessy.

GOOGL opened at $319.09 on Friday, below both its 50-day moving average of $360.63 and its 200-day moving average of $337.38.