Transcript: Alphabet Q2 2026 Earnings Conference Call

Alphabet (NASDAQ: GOOG ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Alphabet's second quarter 2026 revenue grew 24% year-over-year, driven by AI investments in Search, YouTube, and Cloud, with Cloud revenue up 82%. 5 Flashlight, and reported high demand for AI infrastructure, with a Cloud backlog of $514 billion. Google Services revenue increased 15% to $95 billion, with strong growth in Search and YouTube ads, while Cloud operating income more than tripled year-over-year. Alphabet is updating its CapEx guidance to $195-$205 billion for 2026, reflecting increased capacity investments to meet AI demand.

Management emphasized strong AI-driven momentum across Search and YouTube, with plans to expand AI capabilities and accelerate model releases, including the ambitious Gemini 4. Full Transcript OPERATOR Welcome everyone. Thank you for standing by for the Alphabet second quarter 2026 earnings conference call. At this time all participants are in listen-only mode.

After the speaker presentation there will be a question and answer session. To ask a question during the session you will need to press star one on your telephone. I would now like to hand the conference over to your speaker today, Jim Friedland, Head of Investor Relations. Please go ahead.

Jim Friedland, Head of Investor Relations Thank you. Good afternoon everyone and welcome to Alphabet's second quarter 2026 earnings conference call. With us today are Sundar Pichai, Philip Schindler, and Anat Ashkenazi. Now I'll quickly cover the safe harbor.

Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-K and 10-Q, including the risk factors.

We undertake no obligation to update any forward-looking statement. During this call we will present both GAAP and non-GAAP financial measures. xyz/investor. Our comments will be on year-over-year comparisons unless we state otherwise.

And now I'll turn the call over to Sundar Sundar Pichai — CEO Hi everyone. Thanks for joining us. We have exciting momentum. Alphabet revenue grew 24% year over year.

Our AI investments are redefining what's possible across every part of our business. Our momentum starts with Search, where people are adopting one seamless Search experience. Across AI Overviews and AI Mode we saw 17% revenue growth in Search and Other, and YouTube ads grew 13%. Cloud revenue grew 82%, powered by strong demand for AI infrastructure and AI solutions, and Cloud backlog grew to $514 billion.

It's great to see the wide adoption of Gemini Enterprise, with nearly 90% of the Fortune 100 using it. Today I'll expand on our AI progress, our global product footprint led by Search and YouTube, Google Cloud's leadership, and our long-term bets. First, AI. 5 Flashlight, which are cost effective and highly efficient.

We are seeing tons of demand for our workhorse Gemini Flash series because it hits the sweet spot of performance and cost. 5 Flash Cyber, which I'm really excited about. Paired with our Codemander agent, it finds and fixes vulnerabilities and delivers performance at the frontier comparable to far bigger cyber models. 5 Pro is currently in testing and our team is already building the next generation of models.

We have started our most ambitious pre-training run yet for Gemini 4 and are excited by the progress we are seeing at the frontier. Demand for our models is translating to strong token usage across developers and enterprise customers and we continue to be supply constrained, a sign of momentum and rapid adoption. More than 9 million developers are building each month with our models across our APIs and key developer products. Our model APIs are now processing approximately 22 billion tokens per minute.

That's up from 16 billion just a quarter ago. Additionally, this quarter we launched Omni. It allows users to create anything from any input, starting with video. Since launching at I/O in May, there's been a 40% increase in daily active users creating videos on the Gemini app.

Our Gemma family of open models, small enough to run on local devices, are hugely popular. These models have been downloaded over 900 million times and our latest GEMAPHORE models have been downloaded over 300 million times since launching in April. Our agent tech development platform Antigravity allows anyone to build in the agent-first era. 4 million weekly active users.

Antigravity is a powerful tool for users and enterprises, and it's completely accelerated how we build internally. As just one example, a team in Chrome is now on track to accelerate delivery by eight times, compressing a two-year timeline into three months through model-driven refactoring. Moving on to our global product footprint, which brings AI to more people than any other company. Starting with Search, AI continues to drive an expansionary moment, with new experiences resonating with users and driving growth in queries.

As a big football fan, I was particularly excited to see Search usage hit an all-time high during the World Cup this year. This really highlights how much people turn to Google in moments that matter. We continue to make Search more helpful and intuitive. We recently brought together AI Overviews and AI Mode into one seamless Search experience that combines our frontier capabilities with the best of the web.

And we are continuing to incorporate more frontier capabilities into Search. With agents, personal intelligence, and notebooks, our AI-powered features are driving increased Search usage. Since expanding AI Mode globally last October, we've surpassed 1 billion monthly active users. And just like AI Overviews, AI Mode is driving an incremental increase in Search queries overall, and we are now sending billions of clicks to websites every week through AI features in Search.

As we serve more of these queries, we have continued to drive efficiencies. Thanks to our engineering and hardware optimizations, this quarter we reduced the cost of AI Mode responses to its lowest level since launch, even as we have brought more advanced AI capabilities. Philip will also talk more about how we are innovating the ads experience next. The Gemini app, which now has 950 million monthly active users, with daily active users tripling in.

S. and internationally. They've been shipping helpful new features like this at an incredible clip. On to YouTube.

Month after month, when a big event happens in the world, the world turns to YouTube. 7 billion unique viewers globally watched World Cup-related videos on YouTube during the FIFA World Cup 2026. We're also bringing the power of conversational AI directly into the YouTube experience. Ask YouTube uses our Gemini models to let people ask complex questions about individual videos, get quick takeaways, and jump straight to moments in those videos.

The early engagement is encouraging. More than 140 million users engaged with Ask YouTube on the watch page in June 2026, and we are bringing that Ask experience to the wider Search experience on YouTube. Next, Cloud. Our continued momentum is driven by our integrated AI portfolio consisting of chips, models, data, security, and agent platforms, all designed to work together.

Gemini continues to be a key driver of growth and is deeply integrated across all of our Cloud products, including Gemini Enterprise, Data Analytics, Cybersecurity, and Google Workspace. We are seeing strong, diversified demand across products, customers, geographies, and industries. Our product differentiation is driving expansion in three ways. We are winning new customers, more than doubling our acquisition velocity year over year.

We are deepening our relationships with existing customers who are expanding their usage and exceeding their commitments by more than 50%, also an acceleration over last quarter. We are driving growth with partners, with transactions on Google Cloud Marketplace growing over seven times year over year. One of the strongest parts of our growth comes from the rapid adoption of our Gemini Enterprise platform. It's differentiated with easy-to-use tools to build agents and automate processes, connectivity to enterprise systems, cost management and governance tools.

In Q2, Agent Development Kit, our framework for building and deploying enterprise AI agents, reached nearly 70 million total downloads. As I said, nearly 90% of the Fortune 100 are using Gemini Enterprise. We have customers like PepsiCo for AI and analytics solutions, Intel to streamline core processes, HSBC for wealth management, Bell Canada for customer engagement, Macy's for commerce experiences, and Signal Adona for knowledge management. More broadly, Gemini is transforming how millions of businesses use AI to build custom agents, automate processes, improve cybersecurity, manage customer relationships, streamline data analytics, collaborate effectively, and more.

All of this momentum is driving growth in our paid token usage. Nearly 500 Cloud customers have each processed more than 1 trillion tokens in the last year, and usage is so much deeper than that. Over the last 12 months, more than 2,000 enterprises consumed over 100 billion tokens. We're also seeing strong interest in our AI-powered security platform, which is differentiated because it integrates threat intelligence, cyber response prioritization with BAS, AI, automated scanning, code remediation, and monitoring.

Today, 90% of the Fortune 100 are Google Cloud Security users, nearly 90% of VIS customers are using AI-powered security features, and we have seen a more than 45% quarter-over-quarter increase in the number of AI workloads scanned and protected by our security platform. Our security tools are being used to protect critical infrastructure, including financial services organizations such as Morgan Stanley, telecommunication providers such as Telus, healthcare organizations such as Texas Children's, software companies such as Atlassian, and several government agencies.

And with our new Google AI Threat Defense, we are really excited to bring our new cyber model and Codemander to help our customers defend against AI threats. All of this is powered by our leading AI infrastructure. We offer the industry's broadest range of accelerators from Google and Nvidia, including the new Nvidia Vera Rubin platform and TPU 80 and 8i, which deliver strong price-performance. On top of this, let me mention three unique offerings.

First, our Vergo network, which is designed to meet the needs of modern large-scale AI workloads. It allows customers to connect a million AI accelerators across multiple data center sites into a unified supercomputer. Second, our software stack has native support for JAX, PyTorch, vLLM, and Sglan, enabling workload portability across TPUs and GPUs. And third, our new agent-optimized Axion CPU provides 30% better performance per dollar compared to peer offerings.

We are seeing strong growth in demand for our AI infrastructure offerings from leading labs such as Ineffable Intelligence, next-generation AI builders including Takao, financial services like Deutsche Börse Group, pharmaceutical companies such as Pfizer and Roche, and robotics and spatial intelligence companies such as World Labs. We are continuing our strategy of investing in promising companies and internal efforts that bring pioneering AI research into the real world. We have seen exciting progress from our Other Bets. Waymo introduced its newest vehicle Ohio to public riders.

This is the first vehicle powered by the 6th generation Waymo Driver and will welcome more riders in the coming months. Wing has safely completed more than 1 million home deliveries, and we continue to grow our presence through partnerships with Walmart, DoorDash, and Papa John's. In health and drug discovery, Isomorphic Labs raised over $2 billion to power its AI drug-defined engineering scale globally and advance its drug candidate pipeline. It's truly been an extraordinary first half of 2026, with much more to come.

Thanks to all of our employees and partners worldwide for their incredible work this quarter. With that, Philipp, over to you. Philipp Schindler — SVP & Chief Business Officer Thanks, Sundar, and hello everyone. I'll start with a review of Google Services, highlighting our momentum across Search, YouTube, and partnerships.

Google Services revenues were $95 billion for the quarter, up 15% year on year, primarily driven by Search. Search and Other delivered 17% growth with retail and finance driving the largest contributions. YouTube advertising revenues grew 13%, driven by direct response and brand. Network advertising revenues were down 1% year on year.

Strong performance in Search and YouTube underscores how our investments in AI translate into measurable value for users and advertisers. Starting with Search, Search and Other revenues reached over 63 billion for the quarter. Sundar highlighted the momentum we see in Search, which directly impacts our advertising business. We continue to accelerate the deployment of Gemini across our entire ads infrastructure to boost performance in three areas mentioned: ads quality, advertiser tools, and new AI user experiences.

First, ads quality. At Google Marketing Live, we showcased how Gemini improves query understanding, allowing us to find relevant ads for longer searches previously difficult to monetize. The core engine of our Search ads relies on a dual prediction, delivering immediate utility for the user while maximizing measurable value for the advertiser. Gemini completely supercharges this capability.

We use Gemini's advanced reasoning to decode the nuances of longer, more detailed queries. With Shopping ads, for instance, we drove a 20% improvement in showing highly relevant ads, helping shoppers immediately find the best match. Second, advertiser tools. Take AI Max.

It has become the core building block for advertisers to fully participate in our new AI experiences. It's out of beta and half a million advertisers have already adopted it. Those who adopt our AI—powered campaigns like AI Max or PMax see an average of 15% more conversions or value on Search at a similar ROAS. AAA Auto Club Enterprises used AI Max to personalize creative assets and capture growth from increasingly detailed insurance searches.

This led to a 17% improvement in conversion volume and an 11% decrease in cost per lead. We see strong adoption of our generative AI creative tools, which makes creative development easier, especially for SMBs. In fact, over half of our SMB customers globally use AI to create or optimize their creatives. Third, new AI user experiences.

At I/O, we showed how Search, including AI Overviews and AI Mode, works as one connected experience. As you saw from our results, our performance across this holistic system is robust. We continue to be encouraged with monetization performance on queries that show AI Overviews. Even as we've expanded AI Overviews to more commercial queries across AI Overviews and AI Mode, people are asking more specific and detailed questions, providing opportunities for more relevant ads.

Within AI Mode, we continue to test and deploy a range of new ad formats. For text ads, we improved performance by adding contextual sitelinks based on the conversation. Direct Offers is gaining momentum, with partners like IHG Hotels & Resorts soon surfacing special offers during trip planning and highlighted answers. Our latest experience placing clearly marked sponsored links inside list responses is showing early user traction.

Looking at Commerce, in collaboration with the retail industry, we established the open—source Universal Commerce Protocol, UCP, as the new standard for agentic commerce. Merchants are rapidly adopting UCP, with Target and Steve Madden now live, while new members have joined the UCP Shopping and Food Tech Councils to help steer its vision. We also announced Universal Cart, allowing shoppers to add items from different retailers across Google services and buy in a single checkout. Now onto YouTube.

As a FIFA Preferred Platform Partner, we helped fans around the world tune into the games. 7 billion unique viewers watched World Cup—related videos and over 550 million watched them on their televisions. This made the FIFA World Cup 2026 the most viewed World Cup in YouTube history. Advertisers connected with fans through FIFA channel takeovers, Gemini—powered soccer—themed sponsorships, and game day Mastheads.

And of course, a huge congratulations to Spain for taking home the trophy. More broadly on YouTube, we introduced an exclusive slate of creator shows, making it easier for brands to tap into the fandom of creators. We launched custom sponsorships to put brands at the heart of the world's biggest moments as they unfold on YouTube, using AI to dynamically surface videos tailored to a brand's desired moment. Brands continue to partner with YouTube creators to engage new audiences.