Alphabet: $119.8 billion in revenue and a $112.1 billion net profit, but AI costs alarm investors

Alphabet is reporting eye-watering figures: $119.8 billion in revenue and a record net profit of $112.1 billion. Yet investors are becoming increasingly wary as its AI bill continues to rise.

Alphabet has released striking results for the second quarter of 2026. The group recorded revenue of $119.8 billion, up 24% year on year. This marks the twelfth consecutive quarter in which Google’s parent company has posted double-digit growth.

Cloud was an especially strong performer. Google Cloud brought in $24.8 billion, an 82% leap from last year, while analysts had expected only 64%. Demand for artificial intelligence infrastructure and solutions is therefore still outstripping even the most optimistic forecasts.

Its net profit, however, is drawing the greatest attention: $112.1 billion, a 298% year-on-year increase. It is an unprecedented figure for Alphabet, which generated more profit in three months than 459 companies in the Fortune 500 make in annual revenue.

However, much of that profit did not come directly from advertising, cloud services or YouTube. Instead, it stems from a far less visible mechanism connected with Alphabet’s financial stakes in other technology giants. Google recorded a $99 billion gain on the shares it holds in Anthropic and SpaceX. Of that sum, $77.1 billion flows directly into net income after tax, representing almost 70% of total quarterly profit.

Competition is becoming ever fiercer

“Our investments in AI are redefining what is possible across every part of our business,” says Google chief executive Sundar Pichai. The day before releasing its results, the Mountain View company unveiled three new Gemini models: 3.6 Flash, 3.5 Flash-Lite and, most notably, 3.5 Flash Cyber, which is designed to identify and fix security vulnerabilities. Initially, the latter will be available only to governments and trusted partners.

It is nevertheless operating at a disadvantage. Its flagship model, Gemini 3.5 Pro, which is intended to compete with the market’s leading offerings, remains in testing after being delayed. Meanwhile, Anthropic and OpenAI are rolling out updates at pace, while lower-cost Chinese models such as Kimi K3 are gaining ground.

Asked about the delay, Sundar Pichai acknowledged that the company still needed to improve, particularly in AI-assisted coding, while insisting that Google had already begun training Gemini 4, its next generation.

Alphabet’s forecasts fail to reassure investors

Despite results that beat expectations, Alphabet’s share price fell by 3% to 4%. The reason is its 2026 capital-expenditure forecast, now set at between $195 billion and $205 billion, compared with the $180 billion to $190 billion announced in the previous quarter.

Google also reported a quarterly “negative free cash flow” for the first time in its history, amounting to $5.9 billion. In practical terms, the company is now spending more money than it generates from its day-to-day operations.

As long as growth continued, the market accepted the vast investment in AI. But as the sums committed exceed $200 billion a year, investors are demanding more tangible proof that this enormous spending will eventually translate into commensurate revenue. This is particularly so because the technology faces significant limitations and is costing ever more for the businesses that adopt it. For now, its business model appears unviable over the long term.