News

Alphabet Earnings Preview: AI Capex Fog and Gemini Delay Weigh on Shares After Hours

Alphabet heads into Q2 earnings with the market laser-focused on AI capital spending guidance and reports of a delay in its next-gen Gemini model. Shares slipped 1.38% in after-hours trading as the "Frozen v2" chip rally fades.

OurAlpha

22 Jul 2026 — 4 min read

Market focuses on Alphabet's AI capital expenditure and Gemini progress as shares dip ahead of earnings.

Google parent Alphabet (GOOGL) reports Q2 earnings after the bell Wednesday, July 22. As of 10:30 PM ET (July 21), shares were trading at $347.15 in after-hours action, down 1.38% from the prior close of $351.99. All eyes are on AI capital expenditure guidance, progress on the Gemini model, and cloud segment performance — with the prior session's "Frozen v2" chip-fueled rally partially unwinding.

Wall Street expects Alphabet Q2 revenue of $117.1 billion and EPS of $2.90, representing YoY growth of 21% and 25%, respectively.^[Forbes]
Quarterly capex is expected to climb to roughly $45 billion, up nearly 26% from the prior quarter.^[Forbes]
Analysts project Google Cloud revenue will surge 65% to $22.4 billion, a key barometer of AI product demand.^[Forbes]
Alphabet's in-house "Frozen v2" AI chip is reportedly 10x more energy-efficient than its predecessor, with deployment planned by 2028 to ease AI compute shortages.^[Forbes]
Some analysts argue Alphabet could be the first hyperscaler to cut AI capex guidance due to free cash flow pressure.^{[Seeking Alpha]}
On Monday (July 20), shares rallied 2.8% to above $356 on the chip news, reversing a cumulative 6.5% decline from the prior two sessions.^[Forbes]

Google parent Alphabet (GOOGL) is set to deliver its Q2 report card after the closing bell on Wednesday, July 22. As of 10:30 PM ET on July 21, the stock was changing hands at $347.15 in after-hours trading, down 1.38% from the prior close of $351.99. On Monday (July 20), shares jumped 2.8% to above $356 on news that the company is developing a highly efficient AI chip called "Frozen v2," adding a combined $15 billion to the fortunes of co-founders Larry Page and Sergey Brin^[^Forbes^]. But as earnings approach, worries over massive AI spending and reports of a delay in its next-generation Gemini model are weighing on the stock after hours^[^Reuters^].

Market Expectations: Revenue and Profit Growth, Cloud in Focus

According to FactSet, the Wall Street consensus calls for Alphabet Q2 revenue of $117.1 billion and EPS of $2.90, representing YoY growth of 21% and 25%, respectively^[^Forbes^]. Google Cloud's performance is the key metric for gauging the commercialization of its AI products. Analysts expect cloud revenue to surge 65% YoY to $22.4 billion^[^Forbes^]. Alphabet shares have gained 87.5% over the past year and are up roughly 13% year-to-date in 2026^[^Forbes^].

The Capex Spiral: Inflation vs. Expansion

The most closely watched number this quarter isn't revenue or profit — it's Alphabet's capex guidance. Wall Street expects quarterly capex to climb to roughly $45 billion, up nearly 26% from the prior quarter^[^Forbes^]. Tech giants including Google, Amazon, Microsoft, and Meta have collectively planned over $700 billion in AI data center spending this year^[^Bundle^]. However, Morgan Stanley estimates the cost of building 1 GW of AI capacity has risen about 20%. For example, a typical Nvidia-based AI system now costs roughly $35 billion per GW, up from $29 billion^[^Bundle^]. Brad Gastwirth, research director at Circular Technology, notes that roughly 20% to 30% of AI capex growth is inflation, with 70% to 80% representing genuine expansion. "Investors need to be careful when interpreting higher capex — there is definitely an inflation component," Gastwirth said^[^Bundle^]. Analysts at Cantor Fitzgerald expect little change in 2026 capex plans this earnings season, but 2027 estimates are set to be revised sharply higher, with Alphabet potentially reaching $283 billion^[^Bundle^].

Analyst Divide: AI Bubble Burst or Moat Fortification?

The market is sharply divided on Alphabet's AI investment strategy. On one side, some argue Alphabet could be the first to cut AI capex. Seeking Alpha analyst Damir Tokic points to dwindling free cash flow — which he says could be 60% lower than reported — forcing Alphabet to fund itself through debt and equity issuance, increasing credit risk and diluting existing shareholders. He calls this model unsustainable given uncertain ROI^[^{Seeking Alpha}^]. On the other hand, Reuters highlights Alphabet's leading AI position, noting that despite Gemini delays, the company continues to invest heavily to stay competitive^[^Reuters^]. Investor's Business Daily takes a broader view, noting that investors want to see AI spending "strengthening" the business, not just adding costs^[^{Investor's Business Daily}^].

'Frozen v2' Chip: A Long-Term Solution to Compute Shortage

According to a Monday (July 20) report from The Information, Alphabet is developing a new in-house AI chip codenamed "Frozen v2." Google engineers expect the chip to be up to 10x more energy-efficient than its predecessor. Alphabet plans to deploy the chip by 2028 to alleviate internal AI compute shortages that have forced Google Cloud to turn away some customers^[^Forbes^]. The news sent shares higher on Monday, adding $8 billion and $7.4 billion to the fortunes of Larry Page and Sergey Brin, respectively. According to Forbes' real-time billionaires list, Page ranks second globally with a net worth of $292.4 billion, trailing only Elon Musk ($781.2 billion), with Brin close behind at $269.7 billion^[^Forbes^].