Alphabet presents its second-quarter results with a focus on Google Cloud, Gemini 3.5 Pro, and the return on its artificial intelligence investments.
The release of Alphabet’s results comes at a particularly sensitive time for Google’s technology strategy. The growth of its cloud computing business keeps market expectations high, but the delay of Gemini 3.5 Pro once again puts the profitability of large outlays in artificial intelligence under scrutiny.
Google’s parent company is scheduled to report its performance between April and June this Wednesday, July 22. Analysts expect solid revenue growth driven primarily by Google Cloud, while investors cautiously watch the increase in spending on data centers and specialized processors.
Gemini delay adds pressure to Alphabet
Gemini 3.5 Pro was initially expected to arrive in June as a centerpiece of Alphabet’s strategy to compete in AI-assisted programming and tasks executed by autonomous agents.
However, the model’s postponement has increased doubts about Google’s ability to keep pace with other developers. Pressure also comes from open-source models created in China that are gaining ground due to their lower costs and rapid evolution.
This scenario is relevant because AI programming tools have become one of the highest-value segments within the generative models market. Their use can increase demand for cloud services and facilitate the sale of technological infrastructure to large companies.
Google Cloud sustains quarterly forecasts
Despite the Gemini delay, Google Cloud continues to be the main growth driver for Alphabet. Estimates compiled by LSEG point to quarterly revenue of $116.93 billion, which would represent a 21.3% year-on-year increase.
Likewise, the market expects Google Cloud sales to advance by nearly 64%. The advertising business is expected to grow at a more moderate pace of 13.7%, although it would still represent an essential part of the group’s revenue.
Cloud expansion is backed by demand for computing capacity for artificial intelligence. Google offers global infrastructure, proprietary models, and specialized processors that allow complex workloads to be executed with greater control over energy consumption and costs.
Data center spending worries the market
In April, Alphabet raised its capital expenditure forecast for 2026 to a range of between $180 billion and $190 billion. The figure reflects the magnitude of the investments needed to expand data centers, acquire equipment, and manufacture chips for artificial intelligence applications.
At the same time, the company announced plans to raise nearly $85 billion through stock offerings. These decisions have fueled the debate over possible overcapacity in the tech industry if demand for AI services does not grow at the same rate as the infrastructure.
For investors, the central question is determining how much time Alphabet will need to convert that spending into sustainable revenue. The strong growth of Google Cloud offers a favorable signal, but the delay of strategic products like Gemini 3.5 Pro complicates that evaluation.
Alphabet retains advantages in its ecosystem
Dave Wagner, portfolio manager at Aptus Capital Advisors, believes that Google has lost ground in some AI programming tools. However, he also highlights the breadth of its ecosystem as an advantage over competitors with more limited distribution.
Alphabet can integrate its models into Search, Android, Workspace, YouTube, and Google Cloud. This network of products allows new artificial intelligence features to be brought to a global user base and generates monetization opportunities across different services.
The company also develops custom chips for AI workloads. This business has received a boost through high-value agreements with companies like Meta Platforms and Anthropic that are looking for alternatives to traditional processors used in data centers.
Shares reflect divided expectations
Alphabet shares have retreated nearly 9% since late April despite the 63% increase recorded then in cloud sales. Recent performance has lagged behind other companies in the group known as the Magnificent Seven.
Nevertheless, the shares maintain an approximate 13% increase in value during 2026. That advance places Alphabet among the companies with the best stock market performance within the tech group.
The earnings presentation will reveal if Google Cloud maintains its pace of expansion and if management offers a more precise timeline for Gemini 3.5 Pro. Any signal regarding data center utilization and the expected return on artificial intelligence investments will also be key.
The market is looking for a concrete answer: whether cloud growth can offset the cost of developing advanced models and expanding the infrastructure necessary to operate them. Much of Alphabet’s valuation over the coming quarters will depend on that relationship.
Source: Reuters
Photo: Shutterstock
