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Alphabet will report earnings Wednesday, and Wall Street expects capital spending to double as the company builds the infrastructure needed to power artificial intelligence.
Large tech companies tend to report their financial results around the same time, but this quarter Alphabet is stepping up to the plate one week before Meta Platforms, Microsoft, Amazon.com, and Apple.
The results and guidance Alphabet gives in its different business segments, therefore, will help investors get an idea of what to expect from the rest of the Mag 7 when their results come.
Analysts surveyed by FactSet expect Alphabet, which will report after the close, to post adjusted earnings of $2.88 a share on revenue of $117.1 billion. Advertising revenue for the quarter is expected to rise 14% from the prior year to $81.3 billion, while search revenue is estimated to increase 17% to $63.4 billion.
Wall Street will be looking closely at Alphabet’s capital expenditures for the quarter and future spending expectations. Analysts expect capex for the quarter to be $45.1 billion, which would be a 101% increase from the $22.4 billion in the same period last year. That massive increase comes as companies like Google spend big on the physical AI buildout.
Google previously guided for 2026 capex to be between $180 billion to $190 billion. It’s possible that the company keeps raising spending guidance as the costs for components, or the hardware needed to power AI, are becoming increasingly more expensive as demand far outpaces supply.
The company also proved its willingness to keep spending when in June it announced its plan to raise $80 billion through equity sales to fund its 2026 and 2027 capex.
“In Q1, the CFO went out of her way to say it [2027 capex] would increase significantly vs. 2026—our take is that when the CFO warns about following year capex in the March Quarter, the plans are going to be aggressive. $300B? $350B?!,” Evercore ISI analyst Mark Mahaney wrote on July 19. He rates Alphabet as Outperform with a $420 price target.
The commentary management gives regarding spending plans will give Wall Street insight on what is likely to come from Alphabet’s peers.
Cloud segment growth is another key area shareholders will be watching. Investors have been looking for accelerating revenue in big tech’s cloud segments for proof that customers are spending for cloud services and AI services to help justify the massive amounts of capital hyperscalers are spending.
Analysts expect Google Cloud revenue to rise 63% from the prior year to $20 billion. Strong numbers here could be a good omen for fellow cloud providers like Microsoft and Amazon.com.
“We continue to see Alphabet well positioned to drive outsized growth & Cloud margin upside given favorable AI positioning across models, silicon, consumer & enterprise distribution,” BofA Securities analyst Justin Post wrote on July 16. He rates the stock as a Buy with a $430 price target.
Shares of Alphabet have gained 12% this year and 82% over the past 12 months. Anything less than knock out results, guidance, and confidence in monetization of their AI services could cause shares that have had a strong run to take a hit.
Write to Angela Palumbo at [email protected]