Alphabet Inc.: profit nearly quadrupled, but $77.1 billion of it is a paper revaluation of investments

22 июля Alphabet Inc. раскрыла результаты за второй квартал 2026 года: выручка выросла на 24,2% до 119,8 млрд долларов, а чистая прибыль — на 297,9% до 112,2 млрд долларов. Однако почти 77,1 млрд долларов прибыли — нереализованный доход от переоценки долевых ценных бумаг, то есть бумажная составляющая. На текущей цене акция выглядит привлекательно: мультипликатор EV/EBITDA (23,0) лишь немного выше собственного трёхлетнего среднего (20,4), а модель портала даёт потенциал роста на 20%.

Key takeaways

— Revenue in Q2 grew 24.2% to $119.8 billion, driven mainly by Google Cloud, which accelerated 82%

— Net profit rose 297.9% to $112.2 billion, but $77.1 billion of it is unrealized gains from investment revaluation

— Operating margin expanded 2 percentage points to 34%, helped by strong Google Cloud growth

— Capital expenditures reached $44.9 billion in Q2, leading to negative free cash flow of -$5.9 billion

— The company raised $49.6 billion via equity and $20.3 billion via debt to fund AI infrastructure

— Net debt is negative at -$121.7 billion, with net debt/EBITDA of 0.2 over the last twelve months

— Trailing dividend yield is only 0.25%, below the market average

Attractiveness

Key figures, USD bn

Revenue in Q2 grew 24.2% to $119.8 billion, driven mainly by Google Cloud, which accelerated 82%

In Q2 2026, Alphabet Inc.'s consolidated revenue reached $119.8 billion, up 24.2% year-over-year. This marks the twelfth consecutive quarter of double-digit growth. In constant currency, growth was 23%.

The main accelerator was Google Cloud: its revenue surged 82% to $24.8 billion, driven by demand for AI infrastructure and enterprise AI solutions. Google Services grew 15% to $94.5 billion, with search advertising up 17% and YouTube Ads up 13%.

Net profit rose 297.9% to $112.2 billion, but $77.1 billion of it is unrealized gains from investment revaluation

Net profit for the quarter was $112.2 billion versus $28.2 billion a year earlier – a 297.9% increase. However, the 'Other income (expense), net' line shows a net gain of $98.0 billion, primarily from unrealized gains on equity securities.

After tax, this paper gain added $77.1 billion to net profit, or $6.26 per diluted share. Without it, profit would have been around $35 billion, still notably above last year's $28.2 billion, but the growth would have been far more modest.

Operating margin expanded 2 percentage points to 34%, helped by strong Google Cloud growth

Operating income in Q2 grew 30% to $40.8 billion, and operating margin reached 34% versus 32% a year earlier. The margin expansion was driven by Google Cloud, whose operating profit tripled to $8.8 billion.

Google Services added $6.5 billion in operating profit, while losses from Other Bets and Alphabet-level activities (mainly shared AI R&D) increased by $0.6 and $2.4 billion, respectively. Still, the overall scale effect outweighed.

Capital expenditures reached $44.9 billion in Q2, leading to negative free cash flow of -$5.9 billion

Operating cash flow in Q2 was $39.1 billion, but capital expenditures rose to $44.9 billion – almost double the year-ago level. As a result, free cash flow for the quarter turned negative: -$5.9 billion.

Over the last twelve months, free cash flow was $53.3 billion, but the trajectory is downward: in Q3 2025 it was $24.5 billion, and now the quarterly figure has gone negative. The company is deliberately ramping up AI infrastructure investments, and this is the main point of tension for shareholders.

The company raised $49.6 billion via equity and $20.3 billion via debt to fund AI infrastructure

In June 2026, Alphabet Inc. issued a combination of Class A and Class C stock and mandatory convertible preferred stock, raising net proceeds of $49.6 billion. The funds are intended for general corporate purposes, including capital expenditures to scale AI infrastructure.

Additionally, the company issued senior unsecured notes for $20.3 billion. This explains the sharp rise in long-term debt on the balance sheet: from $46.5 billion at end-2025 to $98.2 billion at end-June 2026. Still, net debt remains negative thanks to cash and marketable securities growing to $242.5 billion.

Net debt is negative at -$121.7 billion, with net debt/EBITDA of 0.2 over the last twelve months

At end-June 2026, Alphabet Inc.'s net debt was -$121.7 billion – the company holds significantly more cash and marketable securities than debt. Net debt/EBITDA over the last twelve months is 0.2, indicating a conservative financial policy.

Net debt improved by $92.7 billion over the quarter and by $71.2 billion over twelve months. Even with large borrowings and equity issuance, the balance sheet remains very strong.

Trailing dividend yield is only 0.25%, below the market average

Alphabet Inc. pays a quarterly dividend of $0.22 per share, which over the last twelve months translates into a yield of only 0.25%. This is well below the market average, and for income-oriented investors the stock holds no appeal.

The company also declared dividends on mandatory convertible preferred stock – $12.15 per share (equivalent to approximately $0.60 per depositary share). However, the main shareholder return now comes from capital appreciation, not dividends.

Valuation on the latest reported figures

Bottom line

Bottom line: Q2 2026 showed strong operational momentum – revenue grew 24.2%, operating margin expanded to 34%, and Google Cloud accelerated to 82%. However, nearly 69% of net profit is a paper revaluation of investments that generates no cash flow. Real operating profit grew 30%, but capital expenditures almost doubled, and free cash flow turned negative. At the current valuation – EV/EBITDA of 23.0 versus its own three-year average of 20.4 – the share looks rather attractive, especially given the 20% upside on the portal's model. The key question for a holder is whether the company can convert AI investments into sustainable cash flow growth without diluting capital.