Alphabet Inc (NASDAQ:GOOG) reports second-quarter results after Wednesday’s close, with Wall Street bracing for a print that could either validate the company’s AI spending spree or intensify investor unease about it.
Bank of America is firmly in the bullish camp, reiterating its Buy rating and raising earnings estimates ahead of the print. The bank projects revenue of $102.1 billion and EPS of $8.38, both well above Street consensus of $101 billion and $2.90.
Much of that EPS gap traces to an estimated $80 billion boost to operating income from the revaluation of Alphabet’s stake in Anthropic, whose valuation climbed from $380 billion in the first quarter to $965 billion in the second.
Beyond the accounting windfall, the bank sees genuine operating strength: search growth of 17%, cloud growth accelerating to 70%, and a cloud backlog supporting at least $230 billion in revenue over the next eight quarters. Consensus estimates put Q2 revenue closer to $116.8 billion, with cloud revenue growing roughly 63% to over $21 billion.
Capital spending remains the swing factor. Alphabet already guided full-year 2026 capex to $180 billion to $190 billion, and Bank of America thinks that range could climb another 5%, to $190 billion to $200 billion, given accelerating AI demand and rising memory costs.
That spending question is exactly what’s rattling some market watchers. Ipek Ozkardeskaya, senior analyst at Swissquote, argues the real story isn’t Alphabet’s AI models but its infrastructure.
“Alphabet was battered after reports that the latest update to its Gemini model would be delayed by several months. But I believe Alphabet’s real winning trade is not its AI model, it is its data centres, TPU chips and its ability to monetise them,” she said. “It should not, however, double down on infrastructure spending. Even a comfortable earnings beat may not be enough to bring investors back if AI spending continues to run against investors’ desire to see it contained.”
Patrick Munnelly, partner for market strategy at Tickmill Group, sees this print as a referendum on capex discipline broadly.
“Alphabet (is) now the next key test for capex appetite and cloud/AI monetisation,” he said. “The market does not need perfection, but it does need evidence that spending intentions remain intact and that AI infrastructure demand is not slowing at the margin. After last week’s valuation scare, guidance matters more than narrative.”
With Gemini 4 slated for a fall launch and new agentic search features from I/O still rolling out, investors will be listening for guidance as closely as the headline numbers.
Alphabet shares were trading modestly higher, up 0.3% before its earnings release.
