Alphabet reports $98 billion investment gains in Q2 earnings

Jul 22, 2026

Alphabet reported a massive $98 billion investment gain in Q2, boosting net income to $9.11 a share. However, this was overshadowed by the company's first-ever cash burn, a negative free cash flow of $5.9 billion, and an increased 2026 capex forecast of up to $205 billion. The heavy spending on AI infrastructure sparked a tech selloff, with Alphabet's stock falling over 3% and raising investor concerns about profitability across Big Tech.

Tech earnings selloff

▪The tech-heavy Nasdaq index has dropped about 5% since reaching a record high in early June 2026
▪Alphabet's stock fell more than 3% and Tesla's shares slid 4% in after-market trading following their earnings reports on July 22, 2026
▪Following Alphabet's report, shares of Microsoft, Meta Platforms, and Amazon dropped between 2% and 4% before the bell on July 23, 2026

AI infrastructure spending

▪The capex-to-revenue ratio for Meta, Alphabet, Microsoft, and Amazon is expected to nearly double in the current fiscal year
▪Big Tech companies are projected to spend over $700 billion on AI infrastructure in 2026, leaning on debt and share sales to fund the outlays
▪Google and other large cloud providers are building out data centers with advanced chips to provide the computing power for AI models

Alphabet capex guidance

▪Alphabet increased its 2026 capital expenditure forecast to a range of $195 billion to $205 billion
▪Alphabet's previous 2026 capex guidance was $180 billion to $190 billion, meaning the company now expects to spend about $15 billion more
▪In the second quarter of 2026, Alphabet's capital expenditures were $44.9 billion, with most going to AI infrastructure

Tesla capex expansion

▪Tesla reiterated its expectation for more than $25 billion in capital expenditures in 2026, a roughly 200% year-over-year increase
▪Tesla's capex in the second quarter of 2026 soared 142% to $5.79 billion
▪Alphabet reported its first-ever cash burn on record, with a negative free cash flow of $5.9 billion in the second quarter of 2026
▪Tesla is boosting spending on self-driving technology, AI, robotics, and retooling factories for its Cybercab and Optimus humanoid robots

Negative free cash flow

▪Alphabet reported $98 billion in investment gains as part of its second-quarter 2026 earnings results
▪In the same quarter a year prior, Alphabet had generated nearly $25 billion in free cash flow
▪Tesla also reported a negative free cash flow for the second quarter, with a deficit of $1.1 billion

Analyst reactions

▪Despite the company's stock drop, at least 20 brokerages raised their price targets on Alphabet after the earnings report
▪Google Cloud's revenue jumped by a record 82% year-over-year in the second quarter, beating estimates
▪The $98 billion gain pushed Alphabet's net income to $9.11 a share, significantly higher than the average analyst estimate of $2.90