Missed Nvidia in 2009? This Rare Signal Is Flashing Again.\u00a0In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia.\u00a0For the first time in years, that same “Total Conviction” signal is flashing for a company 1\/100th the size of Nvidia.\u00a0Continue \u00bb<\/a> <\/p>\n During the second quarter, Google Cloud revenue reached $24.8 billion — up 82% year over year. Operating income more than tripled to $8.8 billion, lifting the segment margin from 20.6% to 35.5%. Google Cloud ended the quarter with $514 billion in backlog, with over half expected to be recognized as revenue over the next two years. <\/p>\n A distinctive development during the second quarter was Alphabet’s first recognition of revenue from its custom silicon, called Tensor Processing Units (TPU). During the earnings call, Alphabet CEO Sundar Pichai stated that Google Cloud’s “momentum is driven by our integrated AI portfolio consisting of chips, models, data, security, and agent platforms, all designed to work together.” <\/p>\n By designing its own chips, integrating Gemini models across analytics, security, and enterprise services, Google Cloud is able to generate “diversified demand across products, customers, geographies, and industries.” <\/p>\n What is Alphabet spending AI capex on? <\/p>\n Alphabet raised its 2026 capex guidance to $195 billion to $205 billion, up from a prior range of $180 billion to $190 billion. Roughly 60% of Alphabet’s quarterly capex outlay went to servers, while the remainder was allocated toward data centers and networking equipment. <\/p>\n Management made it clear that demand for more capacity still exceeds available supply, even after years of successive increases to infrastructure spend. For this reason, Alphabet expects further capex growth throughout 2027. Notably, temporary reliance on third-party capacity<\/a> will likely continue to pressure profit margins. <\/p>\n Despite free cash flow turning negative to $5.9 billion in the second quarter, Alphabet still generated $39.1 billion in operating cash flow and $185.7 billion over the trailing 12 months. In addition, Alphabet’s overall operating income rose 30% to $40.8 billion — demonstrating ample capacity to self-fund its AI build-out while maintaining a resilient balance sheet supported by cash and diversified financing. <\/p>\n In my eyes, the long-run payoff remains visible: Google Cloud’s margin expansion and backlog surge validate that the AI infrastructure investments are translating directly into high-margin, high-growth revenue. Against this backdrop, Alphabet’s robust profitability provides both the financial means and the necessary proof that its capital intensity is not only justified but essential to capture the next phase of cloud leadership. <\/p>\n Should you buy stock in Alphabet right now? <\/p>\n Before you buy stock in\u00a0Alphabet, consider this: <\/p>\n The Motley Fool\u00a0Stock Advisor\u00a0analyst team just identified what they believe are the\u00a010 best stocks<\/a>\u00a0for investors to buy now\u2026 and\u00a0Alphabet\u00a0wasn’t one of them.\u00a0The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. <\/p>\n Consider when\u00a0Netflix\u00a0made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $399,832!*\u00a0Or\u00a0when\u00a0Nvidia\u00a0made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $1,374,595!* <\/p>\n That performance is why people listen. With a track record of\u00a0beating the S&P 500 by 4x,\u00a0Stock Advisor\u00a0offers a distinct advantage. Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built for the long haul. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of August 9, 2026. <\/p>\n Adam Spatacco<\/a> has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Alphabet CEO Sundar Pichai. Image source: Alphabet. Breaking down Google Cloud’s explosive growth <\/p>\n
<\/a> Data by <\/a>YCharts.<\/a> Why Alphabet’s capex budget is justified <\/p>\n