Alphabet NASDAQ: GOOG executives said the company’s second-quarter 2026 results were driven by broad demand for artificial intelligence across Search, YouTube and Google Cloud, while also signaling that heavy infrastructure spending will continue as capacity remains constrained.
Chief Executive Sundar Pichai said Alphabet revenue rose 24% year-over-year, citing “exciting momentum” across the company’s core businesses. Search and other revenue grew 17%, YouTube advertising revenue increased 13%, and Google Cloud revenue rose 82%, he said. Cloud backlog reached $514 billion.
“Our AI investments are redefining what’s possible across every part of our business,” Pichai said.
AI Adoption Drives Product Momentum
Pichai said Alphabet is seeing strong usage growth for its Gemini model family, including newly announced Gemini 3.6 Flash and 3.5 Flash-Lite models. He described the Flash series as a “workhorse” product because of its balance of performance and cost. Alphabet also launched Gemini 3.5 Flash Cyber, which Pichai said can be paired with the CodeMender agent to identify and fix vulnerabilities.
Pichai said more than 9 million developers are building each month with Alphabet’s models across APIs and developer products. The company’s model APIs are processing about 22 billion tokens per minute, up from 16 billion in the prior quarter.
The Gemini app reached 950 million monthly active users, with daily active users tripling over the past year, Pichai said. He also said that since the company launched Omni at Google I/O in May, there has been a 40% increase in daily active users creating videos on the Gemini app.
In Search, Pichai said Alphabet brought AI Overviews and AI Mode together into one “seamless Search experience.” AI Mode has surpassed 1 billion monthly active users since expanding globally last October, he said. Pichai added that AI features in Search are sending “billions of clicks to websites every week.”
Search and YouTube Advertising Grow
Philipp Schindler, Alphabet’s chief business officer, said Google Services revenue was $95 billion for the quarter, up 15% year-over-year and primarily driven by Search. Search and Other revenue reached more than $63 billion, with retail and finance making the largest contributions. YouTube advertising revenue grew 13%, driven by direct response and brand advertising, while Network advertising revenue declined 1%.
Schindler said Alphabet is using Gemini across its advertising infrastructure to improve ad quality, advertiser tools and AI user experiences. He said Gemini has helped improve query understanding, particularly for longer searches that were previously harder to monetize. In shopping ads, Schindler said the company drove a 20% improvement in showing highly relevant ads.
He also highlighted AI Max, which is now out of beta and has been adopted by half a million advertisers. Advertisers using AI-powered campaigns such as AI Max or Performance Max see an average of 15% more conversions or value on Search at a similar return on ad spend, Schindler said.
YouTube also benefited from the FIFA World Cup 2026. Pichai said more than 1.7 billion unique viewers globally watched World Cup-related videos on YouTube. Schindler said more than 550 million watched those videos on televisions, making the tournament the most viewed World Cup in YouTube history.
Google Cloud Revenue Surges 82%
Chief Financial Officer Anat Ashkenazi said Google Cloud revenue increased 82% to $24.8 billion, driven primarily by Google Cloud Platform, which grew faster than Cloud overall. She said core GCP, AI solutions and AI infrastructure were all important contributors. Alphabet also began recognizing revenue from TPU system sales delivered to customer data centers for the first time in the quarter.
Cloud operating income was $8.8 billion, more than tripling from the year-earlier period, while operating margin rose to 35.6% from 20.7%. Ashkenazi said Cloud backlog increased by more than $50 billion sequentially to $514 billion, driven by demand for enterprise AI offerings. Alphabet expects to recognize just over 50% of that backlog as revenue over the next 24 months.
Pichai said Gemini Enterprise has been adopted by nearly 90% of Fortune 100 companies. He also said nearly 500 Cloud customers each processed more than 1 trillion tokens in the last year, and more than 2,000 enterprises consumed more than 100 billion tokens over the same period.
Security was another focus area. Pichai said 90% of Fortune 100 companies are Google Cloud security users, and nearly 90% of Wiz customers are using AI-powered security features. Alphabet reported a more than 45% quarter-over-quarter increase in AI workloads scanned and protected by its security platform.
CapEx Guidance Raised as Capacity Remains Tight
Ashkenazi said consolidated revenue was $119.8 billion, up 24%, or 23% in constant currency. Operating income increased 30% to $40.8 billion, and operating margin was 34%. Alphabet generated $39.1 billion in operating cash flow during the quarter, but free cash flow was negative $5.9 billion due to capital expenditures.
Capital expenditures totaled $44.9 billion in the second quarter, with the “vast majority” going to technical infrastructure for AI. About 60% of technical infrastructure investment was in servers, while 40% was in data centers and networking equipment.
Ashkenazi raised Alphabet’s full-year 2026 capital expenditure guidance to a range of $195 billion to $205 billion, up from a previous estimate of $180 billion to $190 billion. She said the increase reflects accelerated capacity delivery to meet demand. Alphabet also expects capital expenditures to increase significantly in 2027.
“We’re still in a supply-constrained environment,” Ashkenazi said during the question-and-answer session, adding that Alphabet will continue investing as long as it sees attractive returns.
Ashkenazi also said Alphabet plans to expand its use of third-party capacity in the third quarter as a bridge while it builds more internal capacity. She said that strategy should help Alphabet continue growing its customer base, but it will create modest near-term margin pressure.
Executives Address Model Competition and Long-Term Bets
Asked about returns on generative AI investments, Pichai said Alphabet is in the “very early innings” of a secular shift across consumer and enterprise markets. He said the company has become “more bullish” on the opportunities over the past year.
On model competition, Pichai said the frontier remains dynamic, but Alphabet is committed to competing at that level. He said the company is training Gemini 4 and is aiming to increase the pace of model releases, potentially moving toward a monthly cadence.
Executives also discussed Alphabet’s other bets. Pichai said Waymo introduced its newest vehicle, Oasis, to public riders, powered by the sixth-generation Waymo Driver. Wing has completed more than 1 million home deliveries and continues to grow through partnerships with Walmart, DoorDash and Papa John’s. In health and drug discovery, Isomorphic Labs raised more than $2 billion to support its AI drug design engine and drug candidate pipeline.
Ashkenazi said the board declared a quarterly cash dividend of $0.22 per share, payable in September. Alphabet ended the quarter with $242.5 billion in cash and marketable securities, including $87.1 billion of marketable equity securities, and $98.2 billion in long-term debt.
About Alphabet (NASDAQ:GOOG)
Alphabet Inc NASDAQ: GOOG is a multinational technology holding company headquartered in Mountain View, California. Formed in 2015 through a corporate restructuring of Google, Alphabet serves as the parent to Google LLC and a portfolio of businesses collectively known as "Other Bets." Google was originally founded in 1998 by Larry Page and Sergey Brin; Alphabet is led by CEO Sundar Pichai, who oversees Google and the broader company while the founders remain prominent shareholders and influential figures in the company's history.
Alphabet's core business centers on internet search and advertising, with Google Search and the company's ad platforms (including Google Ads and AdSense) generating the majority of revenue by connecting advertisers with consumers worldwide.
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