Alphabet is set to announce its second-quarter earnings, with analysts and investors keenly focused on the growth and profitability of Google Cloud, especially in light of the company's substantial spending on AI infrastructure. Wall Street expects Alphabet to report approximately $116.8 billion in revenue and earnings per share (EPS) of $2.87, representing robust double-digit growth from the prior year's revenue of $96.5 billion and EPS of $2.31. Benzinga Pro's estimates are slightly lower for revenue at $113.6 billion and $2.87 EPS. Total revenue growth is projected to be around 21-21.3% year-over-year according to LSEG data.
Google Cloud is projected to be the fastest-growing segment, with Zacks estimating sales of $22.79 billion, up from $13.62 billion a year earlier, representing approximately 64-65% year-over-year growth. Analysts anticipate Cloud revenue to be between $22.5 billion and $22.8 billion. The market's focus has shifted to Cloud's profitability, with expectations for Q2 operating margins around 29-30%, a significant increase of about 900 basis points year-over-year. This comes after Google Cloud's Q1 2026 margins reached 32.9%, setting a high bar for comparison.
Investors are particularly scrutinized Alphabet's capital expenditure, which was raised in April to between $180 billion and $190 billion for 2026. This record spending on data centers, AI chips, and Gemini development aims to drive AI growth. However, analysts like Jay Woods of Freedom Capital Markets and Dave Wagner of Aptus Capital Advisors are looking for concrete evidence that AI investments are generating durable financial returns rather than just accumulating costs. The recent delay of Gemini 3.5 Pro also raises questions about the company's AI strategy, with market sentiment indicating that a strong revenue and EPS beat alone may not be sufficient without quantified AI-driven revenue figures. Alphabet also plans to raise $85 billion through equity offerings, including an investment from Berkshire Hathaway, to help fund this buildout.
Key areas of investor focus beyond headline numbers include Google Search advertising and YouTube advertising performance, overall operating margins, and capital expenditure plans. The cloud business continues to benefit from demand for AI infrastructure, including multi-billion-dollar agreements with Meta Platforms and Anthropic, indicated by Cloud's approximately $460 billion order backlog. The options market is pricing in roughly a 6% move in either direction for the stock post-earnings, mapping to an implied range of about $329 to $371. Guggenheim analyst Michael Morris maintains a Buy rating with a $450 price target on Alphabet's stock.
