GOOGL: Alphabet Posts Blowout Earnings but Steeper Spend Spooks Traders, Shares Drop

Revenue easily topped estimates but new capex guidance stoked fears of overspending on AI.

💰 Big Quarter, Bigger Bill

• Alphabet GOOGL delivered a headline-grabbing quarter, posting $120 billion in revenue versus $117 billion expected.
• Adjusted earnings also comfortably topped forecasts, but the stock still slipped after hours. Wall Street wasn't focused on what the Google parent earned — it was focused on what it plans to spend.
• The search giant raised its 2026 capital expenditure (capex) guidance to $195 billion-$205 billion, up from $180 billion-$190 billion.
• Capex is the money companies invest in long-term assets like AI chips, servers and data centers. That’s all good until it becomes so much it gets scary.

☁️ AI Engine Still Roaring

• Google's core businesses continued to deliver. Advertising revenue reached $81.6 billion, narrowly beating estimates, while Google Cloud stole the show with 82% year-over-year growth to $24.8 billion, far exceeding expectations.
• Cloud has become one of Wall Street's favorite AI scorecards. Strong growth suggests businesses aren't just talking about artificial intelligence — they're spending real money to use it.
• Google also said its Gemini AI app now boasts 950 million monthly active users and processes 22 billion tokens per minute, underscoring how quickly the company's AI ecosystem is scaling.

📈 Profits Need Context

• The eye-popping earnings numbers deserve an asterisk. Alphabet reported $112.1 billion in quarterly profit, but that included nearly $99 billion in gains from equity investments, largely tied to stakes in Anthropic and SpaceX.
• Strip out those investment gains and adjusted earnings landed closer to $2.85 per share — still a strong result, but far less spectacular than the headline figure suggested.
• One number did raise eyebrows: free cash flow turned negative $5.9 billion as Alphabet poured cash into AI infrastructure.