Google Q2 Cloud Business Surges 82%, Beating Expectations; Cloud Backlog Hits $514 Billion as AI Investments Begin to Pay Off | Earnings Review

Alphabet, the parent company of Google, announced its second-quarter earnings, with cloud revenue significantly exceeding Wall Street expectations. The company stated that its cloud backlog (backlog) increased to $514 billion, breaking through the $500 billion mark for the first time. This further indicates that the company's massive AI investments are translating into commercial returns.

In the second quarter ended June 30, Alphabet achieved revenue of $119.796 billion, a 24% year-over-year increase; on a constant currency basis, growth was 23%, marking the 12th consecutive quarter of double-digit revenue growth. Operating profit rose 30% year-over-year to $40.77 billion, while the operating margin improved by 2 percentage points to 34%.

Notably, Google Cloud revenue reached $24.768 billion, higher than the market expectation of $22.46 billion, surging 82% year-over-year to record the fastest growth rate in recent years, demonstrating that AI investments continue to convert into commercial returns. Search advertising revenue was $63.27 billion, slightly below the market expectation of $63.28 billion.

Alphabet holds stakes in several companies, including Anthropic and SpaceX. Driven by a substantial increase in unrealized gains on equity securities, the company's other income for the quarter reached $97.98 billion, pushing net income attributable to common shareholders up 298% year-over-year to $112.107 billion.

Meanwhile, Alphabet's capital expenditures for the second quarter totaled $44.92 billion, exceeding the market expectation of $44.15 billion.

Alphabet CEO Sundar Pichai stated, "Our AI investments are redefining the possibilities across every aspect of our business."

He pointed out that the adoption rate of Gemini for Enterprise continues to expand, with nearly 90% of Fortune 100 companies already using the product. The monthly active users of the Gemini App have reached 950 million (exceeding the previous estimate of 920 million), and the Gemini model is currently processing 22 billion API tokens per minute.

Following the earnings release, Google's stock price fluctuated slightly. During the earnings conference call, Google raised its full-year capital expenditure guidance to a range of $195 billion to $205 billion, up from the previously expected $180 billion to $190 billion. After the announcement, market concerns arose regarding whether such massive capital expenditures could yield corresponding returns, causing Google's stock to drop sharply by 4.2%.

Google Cloud Becomes the Largest Growth Engine

Breaking down by business segment, Google Cloud continues to be Alphabet's fastest-growing business.

In the second quarter, Google Cloud revenue reached $24.768 billion, an 82% year-over-year increase, accelerating further from previous periods. The company stated that growth was primarily driven by sustained demand for Google Cloud Platform (GCP) enterprise AI solutions, enterprise AI infrastructure, and core cloud services. Meanwhile, Google Cloud's operating profit reached $8.814 billion, a significant increase from $2.826 billion in the same period last year, indicating a marked enhancement in profitability.

In contrast, the traditional advertising business maintained steady growth:

• Google Search and Other revenue was $63.271 billion, a 17% year-over-year increase;
• YouTube advertising revenue was $11.055 billion, a 13% year-over-year increase;
• Google Subscriptions, Platforms, and Devices revenue was $12.911 billion, a 15% year-over-year increase.

Overall, Google Services revenue reached $94.54 billion, a 15% year-over-year increase.

CEO: AI Investments Are Reshaping All of Google

Alphabet CEO Sundar Pichai stated that the company's AI investments are redefining the entire business.

He revealed that nearly 90% of Fortune 100 companies are currently using Gemini Enterprise; the Gemini model processes 22 billion API tokens per minute, and the Gemini App has reached 950 million monthly active users.

Meanwhile, AI features continue to drive growth in Google search queries, and demand for the company's cybersecurity products remains strong, with the newly launched Gemini 3.5 Flash Cyber showing outstanding cost-efficiency. Additionally, during the 2026 World Cup, over 1.7 billion unique users watched related videos on YouTube, further driving platform traffic growth.

Pichai stated that the company's "differentiated full-stack AI strategy" is continuously creating quantifiable commercial value for consumers, enterprise customers, and partners.

Continuing to Ramp Up AI Infrastructure

To meet the growing demand for AI computing power, Alphabet further strengthened its financing in the second quarter.

In June, the company completed the issuance of Class A shares, Class C shares, and mandatory convertible preferred shares, raising net proceeds of $49.6 billion to expand AI infrastructure and global computing networks. It also issued $20.3 billion in senior unsecured notes and established an at-the-market (ATM) equity offering program of up to $40 billion, although this program had not been initiated by the end of the second quarter.

Regarding cash flow, the company's capital expenditures in the second quarter reached $44.924 billion, far higher than the $22.446 billion in the same period last year, reflecting Alphabet's continued large-scale investment in data centers, AI servers, and computing facilities.

Due to the substantial increase in capital expenditures, free cash flow for the quarter turned negative to -$5.855 billion, but free cash flow for the past 12 months still reached $53.273 billion.

Overall, this earnings report shows that Alphabet's AI investments have begun to drive high-speed growth in its cloud computing business, while its core advertising business continues to expand steadily. AI commercialization is gradually moving from the investment phase to the performance realization phase.