Alphabet earnings to test AI cloud growth against rising capex
Alphabet reports second-quarter earnings on July 22, a release that will test whether AI-driven cloud growth can justify massive capital expenditure projections and support the stock's $440 consensus target.
Alphabet will report its second-quarter financial results after the market closes on Wednesday, July 22. The stock has retreated 14% from a record high reached in May, despite an 87% gain over the past year. Wall Street analysts remain broadly bullish, pegging the median target price at $440 per share, representing a 27% premium to the current $346 price.
The consensus estimate calls for second-quarter revenue of $116.8 billion, a 21% increase, and adjusted earnings of $2.89 per diluted share, up 25%. Alphabet does not provide official forward guidance. These projections follow a first quarter where revenue grew 22% to $109.8 billion, marking the fourth consecutive period of accelerating top-line growth. That first-quarter performance was driven by strong demand for artificial intelligence infrastructure. Furthermore, first-quarter net income of $5.11 per share was artificially boosted by unrealized gains from its SpaceX stake. Operating earnings, which strip out those investment gains, rose 29% to $39.6 billion.
Market professionals will focus heavily on management's capital expenditure commentary. During the first-quarter call, executives projected 2026 capex at $180 billion to $190 billion, an upward revision from earlier forecasts. Any further increases could spook investors already weighing the massive hardware costs required to build out AI data centers against the timeline for realizing returns. The balance between spending and monetization is the central risk for the stock at current levels.
The underlying investment thesis hinges on Alphabet's ability to convert those infrastructure investments into cloud market share. The company still ranks behind Amazon and Microsoft in the broader market. However, demand for its Gemini models and custom tensor processing units (TPUs) is driving steady share gains. Google Cloud captured 14% of cloud infrastructure spending in the first quarter of 2026, up from 12% in the same period of 2025.
The upcoming report must demonstrate that this momentum is holding. If Alphabet can match revenue expectations while keeping capex expectations steady, it will likely validate the valuation gap between its current price and the Street's $440 target. Conversely, a significant upward revision to infrastructure spending could pressure the stock further below its May peak.
