Google Stock Slides Toward Third Red Day As Capex Surge Drowns Out Cloud Growth Story: Retail’s Buying The Dip

• Alphabet beat top- and bottom-line estimates for the second quarter, but also raised its full-year capital expenditure forecast.
• GOOGL stock could end in the red for a third straight week.
• Retail traders indicated the results were remarkably strong and make GOOGL a great investment in the current dip.

Alphabet, Inc.’s shares fell 3.5% in early premarket trading on Thursday, heading for its third straight session in the red, after the company’s quarterly results.

While Alphabet beat analysts’ targets for top and bottom line and reported a record 82% growth in its cloud unit, the bump in the company’s 2026 capital expenditure forecast fanned concerns among investors.

GOOGL stock had declined nearly 3% over Tuesday and Wednesday – and now appears to be heading for its third weekly drop. 

Alphabet’s stock move underscores the increasingly high bar for AI and cloud companies, with investors closely scrutinizing spending and whether it is delivering meaningful business returns.

Alphabet’s Q2 Recap

Alphabet’s second-quarter revenue increased 24% to $119.8 billion, beating expectations of $116.93 billion from analysts polled by LSEG/Reuters.

“We saw exciting momentum across the board from Search to YouTube to the Gemini app (which reached 950M monthly active users),” CEO Sundar Pichai said in an X post. 

“Our model APIs are processing 22B tokens/min (up from 16B+ last quarter), driven by our workhorse Flash models. We’re also seeing great adoption of Gemini Enterprise, used by 90% of the Fortune 100, as well as strong demand for our security solutions.”

At the same time, Alphabet spent nearly $44.92 billion in CapEx in the June quarter, twice as much as it did in the corresponding quarter a year ago. The company then updated its full-year CapEx guidance range to $195 billion to $205 billion, up from the previous estimate of $180 billion to $190 billion.

That led Alphabet to post negative free cash flow – of $5.9 billion – for the first time since the company went public in 2004.

Analysts, Tech Execs React To GOOGL’s Report

While GOOGL faced pressure, the company’s report was seen as a positive sign for the broad AI trade.

“Alphabet continues to show real progress in artificial intelligence monetization. As investors seek to understand the returns on massive AI-driven data center spending, we believe returns are showing up for Alphabet across its primary segments,” Morningstar said in an investor note early Thursday.

The research firm highlighted that the fivefold increase in Google Cloud’s backlog was the clearest sign of AI returns. “Beyond cloud, we are seeing continued strength in Search, with Google Search growing 17%. Encouragingly, Alphabet's push to an AI-native search experience is seeing good adoption, with AI Mode's monthly users exceeding one billion,” the note said.

Benchmark general partner and venture capital investor Chetan Puttagunta said the growth in Google’s Cloud business is remarkable and the unit’s sales could match those of Alphabet's core search business in a few years. 

“Google Cloud is now at ~$100B revenue run-rate, growing 80%+ and is 40% of Google's search business. Wild that Google Cloud could be nearly as big as Google Search in revenue in the next year or two on its current trajectory,” Puttagunta said in an X post.

In fact, in a post on X, Tesla and SpaceX founder Elon Musk called Alphabet’s results “impressive.” Tesla too reported its quarterly results on Wednesday, which came in mixed and sent the electric vehicle company’s shares lower.

GOOGL Stock: What Does Retail Think?

GOOGL and GOOG were among the top five trending tickers on Stocktwits early Thursday, with the retail sentiment for GOOGL shifting to ‘extremely bullish’ from ‘bullish’ the previous day.

“$GOOGL The pullback started after the CFO started speaking because her focus was on cost headwinds due to currency and investments in capacity rather than on the earnings they will create. She could have represented both sides of the equation IMO,” a trader wrote.

“Alphabet is a dominant company in a variety of areas in search,  cloud, supercomputing, AI, YouTube entertainment, and Waymo driverless taxis. All are growing,” they said.

Another wrote: “$GOOGL maybe the most Criminal earnings reaction I’ve ever seen.” 

As of their last close, GOOGL shares are up 9.4% year to date, slightly trailing the tech-heavy Nasdaq index.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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