Alphabet Inc. · Q2 2026

The quarter in short

Revenue $119.80B, up 24.2% year over year and 9.0% on the quarter. CORE OPERATING EPS $2.88, up 29.1% year over year and 4.3% on the quarter. GAAP EPS $9.11. Free cash flow −$5.86B. CORE OPERATING EPS came in line with consensus. Rule of 40 score +19.

What we learned

1. The 294% EPS growth was 69% one-time gain. Roughly $6.26 of the $9.11 reported was non-cash mark-to-market, mostly the $94B SpaceX-linked stake.
2. Free cash flow went negative for the first time on record. −$5.9B , as $44.9B of quarterly capex — up 100% — outran $39.1B of operating cash flow. Annualised, that is a run-rate near $180 billion.
3. The capital structure changed, not just the spending. Buybacks went to zero from $13.2B a year ago, and Alphabet raised $49.6B of fresh equity in June including its first-ever mandatory convertible preferred. A company that funded itself from cash flow now does not.
4. Cloud margin is the part of the thesis that is already proving out. Google Cloud revenue +82% to $24.8B with operating margin from 20.7% to 35.6% — the third straight quarter of expansion (17.8% → 32.9% → 36%), on customers Kurian says are growing spend 50% a year.
5. The stock got cheaper than the growth rate on the way down. At $319.88 Alphabet traded at roughly 27x trailing earnings on 24% revenue growth , with 63 analysts still at Buy and an average target near $417. The disagreement is entirely about whether the capex converts.

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