Alphabet's second-quarter results blew past Wall Street's estimates and the company raised its already enormous 2026 capital spending plan, according to a rundown from the X account Serenity. Earnings per share came in at $9.11 against a $2.91 forecast, revenue reached $119.7 billion versus $116.98 billion expected, and Google Cloud revenue jumped 82 percent year over year to $24.77 billion, far above the 63 to 65 percent growth analysts had modeled. Cloud operating margin expanded to 35.6 percent from 32.9 percent in the first quarter. Capital expenditure landed at $44.92 billion, roughly in line with forecasts, but the company lifted its full-year 2026 capex guidance to $195 billion to $205 billion, up from the prior $180 billion to $190 billion range, and signaled another significant increase is coming in 2027. Serenity called it perhaps the most bullish signal yet for the chip and hardware suppliers that sit upstream of the hyperscalers. Monthly Gemini users have grown to 950 million, up from 750 million in February, with the platform now processing 22 billion API tokens per minute, a pace of growth Serenity says explains why Google ran short on compute and had to trim allocations to customers such as Meta. With the cloud business accelerating while margins expand, the read is that AI infrastructure spending is nowhere near slowing, a setup Serenity flagged as good news for optics and networking suppliers like $LITE heading into the earnings call.
Why it matters · Alphabet is the first hyperscaler to report and its raised capex guidance sets the bar for Microsoft, Meta and Amazon's earnings next week, the single biggest swing factor for chip, memory and optics demand through 2027.
Worth asking · Google just raised its already massive AI spending plan while cloud margins expanded, is this the confirmation the AI capex bulls needed, or does a market pricing perfection get set up for disappointment when Microsoft and Meta report next week?