Concerns about an artificial-intelligence bubble are growing as market valuations rise, but Alphabet’s latest results show why investors continue to distinguish between companies across the sector. Alphabet’s shares have gained about 300% since the start of 2023, while its 2026 capital-spending forecast has reached $195 billion to $205 billion.
The spending is aimed largely at technical infrastructure, including data centers.
Alphabet’s second-quarter earnings also included a major investment-related boost. Most of that category consisted of unrealized gains on equity investments, making reported profit much larger than income generated by ordinary operations.
The company’s established businesses continue to fund the investment cycle. Google Advertising accounted for 68% of revenue, and Alphabet generated about $53 billion in free cash flow over the trailing 12 months. That position contrasts with some competing hyperscalers that have turned free cash flow negative or are struggling to keep it positive.
Google Cloud is becoming a larger part of the business as the AI buildout proceeds.
CEO Sundar Pichai has also said Alphabet’s autonomous-vehicle unit, Waymo, could contribute meaningfully to revenue as early as 2027. Alphabet’s forward earnings multiple is about 29, compared with roughly 27 for the S&P 500. Analysis: The figures leave Alphabet exposed if AI growth weakens, but its advertising base, expanding cloud business and ability to adjust capital spending give it more flexibility than companies relying on a narrower set of businesses.