Record profit paired with first negative quarterly free cash flow since 2004
Alphabet reported Q2 2026 net income of $112.1 billion while posting its first negative quarterly free cash flow since the company's 2004 IPO, at minus $5.9 billion, as capital expenditure nearly doubled year over year to $44.9 billion, almost all directed at AI servers, networks and data centers. CFO Anat Ashkenazi said the surge in infrastructure investment "will continue to put pressure on the P&L in the form of higher depreciation expense and related data center operations costs such as energy," according to coverage published July 30. Roughly $77.1 billion of the quarter's net profit came from after-tax, mostly unrealized gains on equity stakes including a holding named as SpaceX, leaving EPS closer to consensus at about $2.85 ex-items.
Capex guidance lifted to $195–$205 billion, with depreciation bill due in 2027
Management raised full-year 2026 capital expenditure guidance to between $195 billion and $205 billion, up from $180 billion to $190 billion, and signaled another significant increase in 2027. Ashkenazi disclosed that about 60% of last quarter's infrastructure outlay went to servers, with the remainder split between networking equipment and data centers. Applied to the midpoint of guidance, roughly $120 billion of this year's purchases will depreciate over six years, translating to about $20 billion of annual depreciation expense for the next several years, on top of assets bought in 2025 that are already depreciating. Other cost of revenues rose 22% year over year to $29.8 billion, with depreciation among the drivers; research and development grew 32%, lifted by depreciation and AI-talent pay. To fund the buildout, Alphabet has not repurchased shares since the start of the year, raised $49.6 billion of equity in June and grew its debt stack from about $16 billion to $100 billion over the past year.
Google Cloud backlog climbs past $514 billion as segment margins expand
Google Cloud revenue rose 82% year over year to $24.8 billion, with operating margin reaching 35.6% and operating income more than tripling to $8.8 billion. The segment's backlog climbed by more than $50 billion sequentially to $514 billion of signed contracts, evidence that the spending is matched by committed demand, though most of the revenue from already-ordered TPUs is not expected until 2027. Total Alphabet revenue rose 24% to $119.8 billion, the company's 12th consecutive quarter of double-digit growth, while operating income grew 30% year over year to $40.8 billion. To bridge demand while new data centers come online, Alphabet said it will begin renting third-party compute capacity in Q3 2026.
Google DeepMind launches Gemini Robotics ER 2 for embodied reasoning
On July 30, 2026, Google DeepMind released Gemini Robotics ER 2, an embodied reasoning model designed to orchestrate robotic tasks by combining video understanding, multi-step planning and tool use, including calls to Google Search and user-defined functions. The model succeeds Gemini Robotics ER 1.6 and is available to developers through the Gemini API, Google AI Studio and a private preview on Gemini Enterprise Agent Platform, with integrations demonstrated alongside Boston Dynamics' Spot, Apptronik's Apollo 2 and Franka Robotics' F3 Duo for multi-robot collaboration. Google highlighted gains on Safety Instruction Following and Human Proximity benchmarks and introduced a new benchmark for safe VLA orchestration.
Google Earth adds Nano Banana 2 image generation
Google is bringing its Nano Banana 2 image generation model to Google Earth, allowing users to generate AI imagery from the web app's satellite, aerial and 3D views, according to a July 30 Verge report. Example use cases shared by Google include re-skinning buildings, visualizing proposed projects and producing infographics about locations, extending the company's image-generation features into geospatial mapping.
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