Update (5:00pm ET): It took just a few minutes into the call for management to get to the elephant in the room, namely the relentless spending on overpriced commodity chips, and just like last quarter when GOOGL guided to a much higher capex for the current year, it did so again (if to a slightly lesser extent). The stock promptly slumped 3% to new session lows.

And then:

There was more:

In kneejerk reaction the stock promptly slumped 4% in AH trading to new session lows.

* * * 

Earlier:

As we wrote in our GOOGL preview, according to UBS and JPM analysts, the market would be watching two things above all else when Alphabet became the first hyperscaler to report earnings after the close today: capex guidance and monetization language, as "the debate has shifted from "how big is capex" to "who proves monetization and returns." And yet, in light of the massive expectations for capex growth, the company was facing "downside risk" it it disappointed the buyside bars which were $100BN higher ($350-$375BN) than the median sellside estimate of $250BN. 

So what did GOOGL just report for fiscal second quarter moments ago? Well, Alphabet reported Q2 cloud revenues that surpassed Wall Street’s expectations but slightly missed on sales tied to its search-engine business, threatening to fuel concerns about its heavy spending on artificial intelligence. 

The Google parent also said cloud sales totaled $24.77 billion for the quarter ended June 30, a jump of 82% over the same period last year. That was better than the $22.46 billion that analysts expected, but well short of some buyside whisper bogeys. Sales from search advertising generated $63.27 billion, just below estimates for $63.28 billion. 

Here are the details: 

Here is what the company's explosively growing capex looks like now:

Some other notable highlights from the report: 

Commenting on the quarter, CEO Sundar Pichai said that “our popular AI features are driving Search query growth” although many would counter that GOOGL's popular AI features were popular 9 months ago and users havelong since moved on to other platforms. He added that “Google Cloud saw a meaningful acceleration in growth as revenues increased 82% to $24.8 billion, led by an increase in Google Cloud Platform (GCP) across enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.”

The company also said that Gemini models now process 22 billion API tokens per minute: “We are seeing strong demand for our security solutions, and our new Gemini 3.5 Flash Cyber delivers highly cost- efficient performance at the frontier.”

Amusingly, the company said that it still hasn’t sold any shares under ATM program, a program which otherwise would be reserved to C-grade meme stonks desperate for liquidity. Come to think of it, if GOOGL plans on unveiling some insane capex number like $400BN or so for 2027, it will absolutely be desperate for liquidity in just a few months. 

Alphabet is the first major US hyperscaler to report earnings this season, offering an early glimpse of what’s to come. The tech sector has committed hundreds of billions of dollars to data centers and other AI offerings, but has yet to show any measurable returns for the trillions it plans on spending on commodities like GPUs and extremely overpriced memory chips. Google is set to spend more than ever on capital expenditures this year to compete in the AI race, and investors have been waiting to see whether that spending is driving new growth or ultimately weighing on profitability. And it appears that investors are starting to get cold feet waiting for the ROI and margin inflection point (which according to Goldman's agentic propaganda report was supposed to take place this past quarter... it didn't).

The lukewarm results threaten to intensify investor scrutiny of Alphabet’s AI spending, which is projected to reach record highs in 2026. Wall Street has been scouring for evidence that the company’s massive investments are generating new growth rather than weighing on profits. As the first major US technology company to report earnings this season, Alphabet’s results also stand to shape expectations for a sector that has collectively committed hundreds of billions of dollars to AI infrastructure. 

Alphabet shares slipped about 1% in after-hours trading Wednesday, after earlier swining to wider losses and modest gains. The stock closed at $342.09 per share in New York, and is essentially unchanged since early February.

The tepid share reaction despite the cloud beat, which offsets the search miss, reflects concerns over what the company will say about future capex and into 2027. During its last earnings call, management said they expect it to “significantly increase” over 2026; if they do the same this time, the market may not be very pleased as the ROI is still lacking.