Alphabet cloud-fuelled earnings beat fails to address fundamental long-term issues

Alphabet Inc (NASDAQ:GOOG) shares fell almost 3% after hours, wiping almost $125 billion from its valuation, despite second-quarter results that beat Wall Street forecasts on both revenue and earnings. The Google parent reported revenue of $119.8 billion and earnings per share of $9.11, against analyst expectations of $116.9 billion. Google Cloud revenue rose 82% year on year to $24.77 billion, and remaining performance obligations, the value of contracts signed but not yet delivered, reached $514 billion against a forecast $488.1 billion.

Capital expenditure hit $44.9 billion in the quarter, double the same period last year, keeping Alphabet on track for full-year spending of $180 billion to $190 billion. Free cash flow fell roughly 47% year on year in the first quarter to $10.1 billion, and chief financial officer Anat Ashkenazi has already told investors 2027 spending will increase significantly again. The stock has dropped in each of the past three months and sits below its 52-week high, behind Apple and Nvidia for the year despite an 11% gain.

Adding to the unease, Bloomberg reported Google has delayed its Gemini 3.5 Pro model over concerns about how it compares with rivals, a claim the company disputes.

Google's advertising business, which delivered $81.63 billion this quarter, depends on an open web of publishers producing the content its search results index and monetise. That web is contracting.