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Alphabet reported blowout earnings results late Wednesday, but the stock dropped after the search giant again raised its forecast for capital expenditures.
The Google-parent reported second-quarter adjusted earnings of $9.11 per share, well ahead of Wall Street’s consensus estimate for earnings of $2.88 per share, according to FactSet. That’s a 294% increase from the prior year. Alphabet said the results included $6.26 a share in gains on the fair value of its equity securities.
Revenue for the quarter of $199.8 billion also beat estimates of $117.1 billion.
Advertising revenue in the quarter rose from the prior year to $81.6 billion, compared to analyst estimates of $81.3 billion. Search revenue of $63.3 billion came in just below Wall Street’s expectation of $63.4 billion.
Google Cloud revenue grew 82% from the prior year to $24.8 billion; analysts had estimated 63% growth. Investors have been looking for accelerating revenue in Big Tech’s cloud segments for proof that customers are spending on AI services.
Capex for the quarter was $44.9 billion, a 101% rise from the same period last year as the company spends to build out the infrastructure needed to power artificial intelligence. Wall Street expected second-quarter capex of $45 billion.
Alphabet reported negative free cash flow for the quarter of $5.9 billion, driven by the investments in capex.
During its earnings call with investors, Google said it now expected to spend between $195 billion and $205 billion on capex, compared with its prior guidance of $180 billion to $190 billion.
The rise comes as the costs for components—the hardware needed to power AI—become increasingly expensive as demand far outpaces supply. Alphabet also proved its willingness to keep spending when it announced plans in June to raise $80 billion through equity sales to fund its 2026 and 2027 capex.
Shares dropped as much as 4.7% in late trading on the capex news after trading mostly flat on the initial earnings report.
Alphabet is the first of the major tech companies to report financial results in this earnings cycle. Its results are a sign that Microsoft and Amazon.com could raise their own spending estimates when they report earnings next week.
Write to Angela Palumbo at [email protected]
