Alphabet Beats Revenue Expectations but Shares Drop on Spending Hike

Alphabet Inc. reported second-quarter 2026 total revenue of $119.8 billion, surpassing Wall Street expectations. The company's cloud division achieved record growth, with revenue climbing 82% to approximately $24.8 billion due to high enterprise demand for AI security solutions and model capacity. Advertising revenue reached $81.6 billion, and the Gemini app grew to 950 million monthly active users.

Despite the strong top-line results, shares fell over 3% in extended trading. This decline followed an announcement by Chief Financial Officer Anat Ashkenazi that the company increased its 2026 capital spending guidance by $15 billion, with projected expenditures now ranging between $195 billion and $205 billion.

CEO Sundar Pichai addressed the delayed launch of the Gemini 3.5 Pro model, noting that the company needs to improve in specific technical areas, including coding and agentic coding. While acknowledging these gaps, Pichai maintained that Alphabet remains at the frontier across many other attributes.