Alphabet Shares Fall 4% Despite Massive Earnings Beat

Alphabet’s stock dropped roughly 4% even after the company posted a blowout second quarter, as investors focused on inflated profits and heavy AI-related spending rather than headline numbers.

Earnings Beat Hides Investment Gains

Revenue climbed 24.2% to $119.8 billion, while earnings per share hit $9.11 against expectations of $2.90. But much of that growth came from a $99 billion gain on equity securities, mostly unrealized, which alone added $6.26 to earnings per share. Analysts note these paper gains can reverse if market valuations shift.

Cloud Business Shows Real Strength

Google Cloud revenue surged 82% to $24.8 billion, with operating income jumping to $8.8 billion. Nearly 90% of Fortune 100 companies now use Gemini Enterprise, and the Gemini app has reached about 950 million monthly users.

AI Spending Pressures Cash Flow

Capital expenditure nearly doubled to $44.9 billion, pushing free cash flow negative $5.9 billion. Long-term debt rose sharply to $98.2 billion. Advertising and Search revenue grew steadily, though concerns linger over AI’s long-term effect on Google’s core search business.