{"slug": "alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again", "title": "Alphabet’s stock sinks after it bumps up AI infrastructure spending yet again", "summary": "Alphabet Inc. reported second-quarter earnings of $2.85 per share, missing the $2.89 analyst estimate, while revenue jumped 24% to $119.8 billion, beating the $116.93 billion forecast. The company's stock fell over 2% in extended trading after it raised its 2026 capital expenditure forecast to $195-$205 billion, up from $180-$190 billion, driven by AI infrastructure spending. Google Cloud revenue hit a record $22.4 billion, up 64%, with an order backlog of $514 billion.", "body_md": "### Alphabet’s stock sinks after it bumps up AI infrastructure spending yet again\n\nGoogle parent company [Alphabet Inc.](https://abc.xyz/) delivered better-than-expected revenue for the second quarter on Wednesday, thanks to strong growth in its cloud business — but the stock sank in extended trading after it missed expectations on earnings and lifted its forecast for capital expenditures.\n\nThe company [reported](https://s206.q4cdn.com/479360582/files/doc_financials/2026/q2/2026q2-alphabet-earnings-release.pdf) second-quarter earnings before certain costs such as stock compensation of $2.85 per share, trailing the $2.89 forecast by Wall Street analysts. However, revenue jumped by 24% in the quarter to $119.8 billion, surpassing the $116.93 billion target. Investors didn’t like what they saw, and Alphabet’s stock was down more than 2% in late trading.\n\nIn a conference call with analysts, Chief Executive Sundar Pichai (pictured) revealed that the company spent $44.9 billion on capital expenditures during the quarter, just ahead of the Street’s estimate of $44.8 billion. The company now expects capex for the year of $195 billion to $205 billion, up from the $180 billion to $190 billion forecast provided last quarter. Alphabet has been pouring money into artificial intelligence infrastructure to keep pace with booming demand.\n\n“We’re still in a supply-constrained environment,” said Chief Financial Officer Anat Ashkenazi on the call with analysts. “I think we’ve said this now for multiple quarters in a row, and we are seeing very strong demand both from external cloud customers as well as across the business.”\n\nEven with the supply constraints, Google Cloud was able to deliver record-breaking revenue of $22.4 billion, up 64% from a year earlier. Google Cloud’s order backlog now totals $514 billion, the company revealed. Google’s cloud growth has been accelerating ahead of competitors Microsoft Corp. and Amazon Web Services Inc. In the previous quarter, Google Cloud topped $20 billion in revenue for the first time.\n\nAlphabet said it’s planning to call on third-party cloud providers to meet feverish computing demand. “Given the supply constraints environment, we plan to expand the use of third-party capacity in Q3 as a bridging strategy while we build up more internal capacity,” Ashkenazi told analysts. “The strategy allows us to keep growing our customer base and capture greater overall value. However, it will create modest margin pressure in the near term as we utilize this capacity.”\n\nAlphabet signaled it was moving in this direction during the quarter when it [struck a deal with SpaceX Corp.](https://www.cnbc.com/2026/06/05/google-to-pay-spacex-920-million-a-month-for-xai-compute-capacity.html) to rent graphics processing units to run artificial intelligence models for $920 million per month. Google’s cloud rival Microsoft has been more active in leasing capacity from a series of outside clouds, including CoreWeave and Nebius Group N.V.. CoreWeave and Nebius shares leapt 4% and 5% in extended trading, respectively, following Ashkenazi’s comments.\n\n“There are very, very large customers of ours on cloud, who we are trying to support them through this extraordinary moment, and the incremental opportunity they are bringing to us, while a short-term cost over a few months may be very high, in the lifetime of the deal, as we bring more capacity on, is highly ROI positive,” Pichai said.\n\nEven as the competition in the AI industry heats up, Google Gemini is going from strength to strength. According to Pichai, the Gemini app now has more than 950 million monthly active users and can process 22 billion tokens per minute. This is happening even as Google is facing intensifying pressure from Chinese open-weight tools as businesses crack down on rising token costs. Google, which debuted three cheaper Gemini models this week, faced blowback earlier in the month after reportedly delaying the launch of its Gemini 3.5 Pro model\n\nPichai said that model is undergoing testing, and the company is already investing compute into Gemini 4 to compete with frontier model makers like Anthropic PBC and OpenAI Group PBC. “It’s a very ambitious effort,” he said. “We wanted to compete at the frontier level of where the frontier will be when Gemini 4 comes out, so we are applying a lot of our compute and effort in that direction.”\n\nAs Gemini scales, Pichai said the company plans to release new models almost every month.\n\nInvesting.com analyst Thomas Monteiro told SiliconANGLE that the latest increase in Alphabet’s capex does not sit well with many of its investors. “Add to that an increasing rates environment and a continuous supply-demand crunch in AI infrastructure, and the notion that the company would fund itself with cash flows forever might be starting to fade,” he said. “Alphabet is now a regular borrower, which means its returns on AI need to clear a funding cost that keeps moving higher.”\n\nHowever, Monteiro said there will still plenty of positives to take from the latest quarter, with the massive Google Cloud revenue beat providing the clearest sign yet that the company’s massive investments are paying off. “The spending is converting into fast-growing, profitable revenue, with contracted deals coming online the moment capacity is built,” he said. “The operating business is doing everything asked of it. The question the market is weighing tonight is simply whether those returns can keep growing faster than the cost of funding them against a shifting rates environment.”\n\nGoogle Cloud’s growing revenue was offset by a poor performance from Google Search, however, as revenue there came in at $63.3 billion, just below the Street’s target of $63.4 billion. Investors are going to be looking much more closely at that business in the coming quarters.\n\nAshkenazi told analysts they should brace themselves for some tougher comparisons when it comes to the company’s search business. She said that while Google continues “to benefit from innovation in search by improving the user and advertiser experience with AI,” the third quarter might be a bit different. “At the same time, in Q3, we will begin lapping an acceleration in search performance that began in the third quarter last year,” she said.\n\nOn the other hand, Google’s YouTube advertising revenue rose 13% to about $11.06 billion, topping the analyst forecast of $10.81 billion. That’s up from $9.8 billion in the year-ago period and about $9.9 billion last quarter. Alphabet’s other bets category, which includes businesses like Waymo and Verily, came in at $382 million for the second quarter, representing a 2.4% year-over-year increase.\n\n##### Photo: Alphabet\n\n# A message from John Furrier, co-founder of SiliconANGLE:\n\nSupport our mission to keep content open and free by engaging with theCUBE community. **Join theCUBE’s Alumni Trust Network**, where technology leaders connect, share intelligence and create opportunities.\n\n**15M+ viewers of theCUBE videos**, powering conversations across AI, cloud, cybersecurity and more** 11.4k+ theCUBE alumni**— Connect with more than 11,400 tech and business leaders shaping the future through a unique trusted-based network.\n\n# Are you AWS customer? 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Our new proprietary theCUBE AI Video Cloud is breaking ground in audience interaction, leveraging theCUBEai.com neural network to help technology companies make data-driven decisions and stay at the forefront of industry conversations.", "url": "https://wpnews.pro/news/alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again", "canonical_source": "https://siliconangle.com/2026/07/22/alphabets-stock-sinks-bumps-ai-infrastructure-spending-yet/", "published_at": "2026-07-23 00:38:15+00:00", "updated_at": "2026-07-23 00:53:12.067168+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-infrastructure", "ai-products", "ai-startups"], "entities": ["Alphabet Inc.", "Sundar Pichai", "Anat Ashkenazi", "Google Cloud", "Microsoft Corp.", "Amazon Web Services Inc.", "SpaceX Corp.", "CoreWeave"], "alternates": {"html": "https://wpnews.pro/news/alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again", "markdown": "https://wpnews.pro/news/alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again.md", "text": "https://wpnews.pro/news/alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again.txt", "jsonld": "https://wpnews.pro/news/alphabets-stock-sinks-after-it-bumps-up-ai-infrastructure-spending-yet-again.jsonld"}}