Alphabet has increased its capital expenditure forecast for 2026 to a range of $195 billion to $205 billion, up from the previous estimate of $180 billion to $190 billion. The company cited demand that continues to outpace its investment capacity.
Google's Q2 2026 Results Show Strong Growth
Google reported revenue of $119.8 billion for the second quarter of 2026, a 24 percent increase compared to the same period last year. That figure beat analyst expectations of $116.9 billion. Google Cloud was a standout performer, growing 82 percent to reach $24.8 billion in revenue. The Services segment, which includes advertising and subscriptions, rose 15 percent to $94.5 billion.
The Gemini app now has 950 million monthly active users, up from 750 million in February. AI Mode in Google Search has crossed one billion monthly active users since its global launch in October. Google claims that AI Mode, similar to AI Overviews before it, is driving more overall search queries. However, the company did not provide data showing that this translates into more traffic for websites compared to traditional search.
Advertising and AI Efficiency Gains
Google says it sends billions of clicks to websites every week through AI features in Search, but without specific data or comparisons to traditional search volume, that claim remains vague. On the advertising side, AI Max has exited beta and already has 500,000 advertisers using it. Alphabet says AI is unlocking billions of new search queries that were previously difficult to monetize.
The cost per AI response in AI Mode has dropped to its lowest level since launch, even as Google uses more powerful models. This points to growing efficiency gains, which were also evident in the recent Flash 3.6 release. Over time, that efficiency could give Google an edge on margins for serving AI responses.
The Role of Frontier Models
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The efficiency gains raise a question about how much a frontier model still matters to Google day to day. For the AGI race, it likely does. For serving daily use cases across its ecosystem, probably less so. "We're seeing tons of demand for our workhorse Gemini Flash series because it hits the sweet spot of performance and cost," Google CEO Sundar Pichai said.
Google Bets on Gemini 4 to Catch Up
Google is still working on a new frontier model and plans to ship new models monthly. But Gemini 3.5 Pro apparently is not part of that cadence, even though Google says it is currently being tested.
CEO Sundar Pichai acknowledged during the earnings call that Google needs a more capable base model first to catch up with the leaders. The next generation of frontier AI models requires "much larger base models," he said. Google is training Gemini 4 to meet that bar.
"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," Pichai said.
He also pointed to specific weaknesses Google is trying to fix. "There are areas where we have acknowledged we need to improve. Coding and agentic coding is an example of that, and I think the teams are very, very focused on it."