Google Cloud growth helped Alphabet deliver a strong June-quarter performance, with total revenue reaching $119.8 billion, above Wall Street’s estimate of about $116.9 billion. Advertising revenue rose to $81.6 billion, supported by Search, YouTube and other products, while adjusted earnings came in at $2.85 per share, slightly below expectations.
Google Cloud Growth Drives Alphabet Revenue
Google Cloud was the standout performer, with revenue jumping 82% year over year to $24.8 billion. The growth was driven by rising demand from businesses using cloud platforms to build, train and run AI applications, helping Google strengthen its position against Amazon Web Services and Microsoft Azure.
Alphabet said customer demand for AI infrastructure continues to exceed available supply. Google also began recognising revenue from direct sales of its Tensor Processing Units, which could become a larger source of income in future quarters.
AI Spending and Gemini Delays Worry Investors
Despite the strong revenue growth, Alphabet shares fell about 3% in extended trading after the company raised its 2026 capital spending forecast to between $195 billion and $205 billion. Management also indicated that spending could rise further in 2027 as Alphabet expands data centres, AI servers, networking systems and computing capacity.
The heavy investment pushed quarterly free cash flow to negative $5.9 billion, reportedly the company’s first negative quarterly free cash flow since becoming publicly listed. Investors are now questioning how quickly these investments will generate sustainable returns.
Gemini delays added further pressure. The release of Gemini 3.5 Pro was postponed while testing continued, raising questions about Google’s progress in AI coding, reasoning and autonomous agent tools. Chief Executive Sundar Pichai acknowledged that the company still needs to improve in coding and agentic AI, but confirmed that training had already begun on Gemini 4.
Alphabet’s cloud and advertising businesses remain strong, and its core search business has not yet been seriously disrupted by competing AI tools. However, Wall Street now wants clear proof that record AI spending can produce stronger products, faster cloud growth, new revenue streams and a return to positive free cash flow.
