Alphabet
GOOGL, NASDAQ, Tech & Internet
- Prev. close
- $342.02
- Volume
- 11.8M
- Market cap
- $4.1T
- Low-volatility blue chip
Why a candidate
Exp 19/100Company research
Researched 2026-08-22 11:50 KSTBehind the reported 298 percent jump in net income sits a $77.1 billion equity gain that has nothing to do with the operating business.
Alphabet earns most of its revenue from search, advertising and YouTube, and cloud infrastructure sales have recently been growing fast. Revenue for the quarter that closed in June 2026 was $119.8 billion, up 24 percent year over year, while cloud revenue grew 82 percent to $24.8 billion. Net income came in at $112.1 billion, a reported 298 percent surge, but the release itself states that $77.1 billion of that was an after-tax gain on equity holdings, and operating income, the core business measure, grew 30 percent. The gap between those two growth rates comes from the market value of stock the company holds, not from the business itself.
Key figures
- Q2 revenue
- $119.8bn
- 2026-06-30
- Operating income
- $40.8bn (34% margin)
- 2026-06-30
- Net income
- $112.1bn
- 2026-06-30
- Diluted EPS
- $9.11
- 2026-06-30
- Cloud revenue
- $24.8bn (+82%)
- 2026-06-30
- Capital expenditures
- $44.9bn
- 2026-06-30
Three quarters of the 298 percent net income gain is an equity markup
Alphabet reported net income of $112.1 billion for the quarter ended June 30, 2026, up 298 percent from a year earlier. A footnote in the same release states that $77.1 billion of that came from an after-tax gain on the company's equity stakes. That gain accounts for $6.26 of the $9.11 in diluted earnings per share. Strip it out and per-share earnings land near $2.85, up 23 percent from $2.31 a year earlier, close to the 24 percent revenue growth. Because equity gains move with market prices, the next quarter could just as easily see this swing pull net income down instead.
Diluted earnings per share ($)
Search and YouTube still bring in most of the revenue
Of the $119.8 billion in quarterly revenue, Google Services brought in $94.5 billion, Google Cloud $24.8 billion, and Other Bets $0.4 billion. Within services, Search & other grew 17 percent to $63.3 billion and YouTube ads grew 13 percent to $11.1 billion. Combined, Google advertising totaled $81.6 billion, 68 percent of revenue, which means the company still earns the bulk of its money from search and video ads even in a quarter when cloud grew 82 percent.
Q2 2026 revenue by segment ($bn)
- Google Services94.5
- Google Cloud24.8
- Other Bets0.4
Cloud is catching up on margin, not just revenue
Cloud revenue rose for three straight quarters, from $17.7 billion in the fourth quarter of 2025 to $20.0 billion in the first quarter of 2026 and $24.8 billion in the second. Cloud operating income rose alongside it, from $5.3 billion to $6.6 billion to $8.8 billion, lifting the segment's operating margin from 30.1 to 32.9 to 35.6 percent. Alphabet's company-wide operating margin was 34 percent this quarter, so cloud's margin has already moved past that average.
Google Cloud revenue ($bn)
Five straight quarters of rising capital spending pushed free cash flow negative
Capital expenditures rose for five straight quarters, from $22.4 billion in the second quarter of 2025 to $24.0 billion, $27.9 billion, $35.7 billion and $44.9 billion in the second quarter of 2026. Free cash flow, operating cash flow minus capital expenditures, moved from $5.3 billion to $24.5 billion to $24.6 billion to $10.1 billion over the same span before turning negative for the first time, at negative $5.9 billion, in the second quarter of 2026. Operating cash flow itself was still positive at $39.1 billion, but capital spending grew faster and is eating into cash. The company raised about $70 billion that quarter, $49.6 billion from stock issuance and $20.3 billion from bond issuance, to help cover it.
Capital expenditures by quarter ($bn)
Free cash flow ($bn)
Common questions
- Does the reported 298 percent net income growth reflect the operating business?
- No. As Alphabet states in a footnote, most of that increase, $77.1 billion after tax, came from a gain on equity holdings. Diluted earnings per share excluding that gain would be roughly $2.85, up 23 percent from a year earlier and close to the 24 percent revenue growth. Operating income, the measure of the core business, grew 30 percent.
- Is Google Cloud profitable now?
- Yes, and increasingly so. Cloud operating income rose from $5.3 billion in the fourth quarter of 2025 to $8.8 billion in the second quarter of 2026, and its operating margin rose from 30.1 to 35.6 percent over the same span, above the company's 34 percent overall margin this quarter.
- Why did free cash flow turn negative?
- Capital expenditures grew faster than operating cash flow. Second-quarter 2026 capital expenditures were $44.9 billion, nearly double a year earlier, while operating cash flow was $39.1 billion, leaving free cash flow at negative $5.9 billion. Alphabet raised roughly $70 billion in stock and bond issuance that quarter to help fund it.
Sources
- 1.Alphabet Announces Second Quarter 2026 Results SEC EDGAR (Alphabet Inc. Form 8-K Exhibit 99.1), as of 2026-07-22
- 2.Alphabet Announces First Quarter 2026 Results SEC EDGAR (Alphabet Inc. Form 8-K Exhibit 99.1), as of 2026-04-29
- 3.Alphabet Announces Fourth Quarter and Fiscal Year 2025 Results SEC EDGAR (Alphabet Inc. Form 8-K Exhibit 99.1), as of 2026-02-04
Reference information compiled from public material. Not investment advice; decisions and their consequences rest with the investor.
See research on other stocks →Today's read
Alphabet scores 19 out of 100 on today's InverseOne expectation ranking, 19 of 30 in the US large-cap universe. There is 20% of room left to its 52-week high. Today's move of -0.35% came with money flowing out; the broader Tech & Internet sector flow is worth checking. Scores are estimates built from price and volume, a starting point for research rather than a trading signal.
Data basis: 2026-08-28, For reference only, not advice
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