Alphabet, Google's parent company, said on the 22nd (local time) that second-quarter revenue this year rose 24% from a year earlier to $119.8 billion (about 177 trillion won). The cloud business drove growth, but cash flow swung to a deficit due to the fallout from aggressive artificial intelligence (AI) infrastructure investments.
Alphabet's second-quarter revenue beat the market consensus of $116.9 billion compiled by market data firm LSEG. It marked 12 straight quarters of double-digit revenue growth.
Operating profit rose 30% from a year earlier to $40.77 billion (about 60 trillion won), and net profit surged 298% to $112.1 billion (about 165 trillion won). Earnings per share (EPS) came in at $9.11, far above the market estimate of $2.89.
However, the sharp jump in net profit and EPS largely reflected a rise in the value of corporations' equity held by Alphabet. Alphabet holds equity in Anthropic and SpaceX, and it posted nearly $100 billion in valuation gains in the second quarter alone from the increase in related equity values.
The cloud business led second-quarter earnings growth. By business, cloud revenue was $24.8 billion (about 37 trillion won), up 82% from a year earlier. It far exceeded the market forecast of $22.46 billion.
Search revenue was $63.3 billion (about 94 trillion won), and advertising revenue was $81.63 billion (about 121 trillion won), up 17% and 13%, respectively.
Revenue in the Google institutional sector was $94.5 billion (about 140 trillion won), up 15%, and YouTube advertising revenue was $11.1 billion (17 trillion won), up 13%. Alphabet said more than 1.7 billion users worldwide watched World Cup-related videos on YouTube during the recently held "2026 World Cup." It added that Google search volume during the World Cup hit a record high.
Users of Google's AI model "Gemini" also increased. Monthly active users (MAU) of the Gemini app reached 950 million, topping the market forecast of 920 million. The number of API tokens processed per minute rose to 22 billion from 16 billion in the previous quarter.
Sundar Pichai, Alphabet's chief executive officer (CEO), said, "Alphabet's second-quarter revenue grew 24% year over year, and Google Cloud revenue increased significantly on the back of demand for AI infrastructure and AI solutions," adding, "About 90% of the Fortune 100 corporations are using Gemini Enterprise."
However, as investments related to AI infrastructure, including data centers, surged, free cash flow (FCF) swung to a deficit of $5.86 billion. Bold AI investment acted as a financial burden. The company's capital expenditures in the second quarter totaled $44.9 billion, up 100% from a year earlier.
Despite solid results, Alphabet's stock price fell 2% intraday. That's because the company raised its capital expenditure (CAPEX) outlook for this year to $195 billion–$205 billion from the previous $180 billion–$190 billion to secure an edge in the AI race.
Anat Ashkenazi, chief financial officer (CFO), said on a conference call after the earnings release that "we raised our capital expenditure outlook as we rapidly expand infrastructure supply capacity to meet rising AI demand," adding, "Supply still is not keeping up with demand."