Alphabet Inc. — Google (אלפבית)
Analytical review · Quarter ended June 30, 2026 (Q2 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. Alphabet's Form 10-Q for the quarter ended June 30, 2026, filed July 23, 2026; the Q1 2026 Form 10-Q; the Form 10-K for 2025; the quarterly earnings releases from February to July 2026; and Form 8-K filings on the June 2026 equity raise and the August 2026 note offering. Market data: GOOG closing price on October 5, 2026, and the Bank of Israel representative dollar rate for the same day.
Company Profile — פרופיל החברה
Alphabet Inc. is Google's parent company. Most revenue comes from advertising: Search, YouTube, and a network of partner sites and apps. Alongside advertising are subscriptions (YouTube Premium, YouTube TV, Google One), the Google Play app store and Pixel devices. The second segment is Google Cloud: cloud infrastructure, an AI platform, the Workspace suite and, from 2026, sales of TPU chip systems the company designs itself. The third segment, Other Bets, consists mainly of Waymo, an autonomous ride service.
Over the 12 months ended June 2026, revenue totaled $445.9 billion and operating income $147.6 billion (33.1%). The company has 198,933 employees and is headquartered in Mountain View, California.
Alphabet has three share classes: Class A with one vote (GOOGL), Class C with no vote (GOOG), and unlisted Class B with ten votes. Per the annual report, founders Larry Page and Sergey Brin hold about 52.7% of the voting power. In June 2026 mandatory convertible preferred shares were added for the first time.
Financial Performance — ביצועים פיננסיים
The quarter: faster growth, and one line bigger than the business
In the April–June 2026 quarter revenue rose 24% to $119.8 billion (23% in constant currency). Search grew 17%: paid clicks rose 13% and average cost per click 3%. Cloud revenue rose 82%. Operating income rose 30% to $40.8 billion, and operating margin widened from 32% to 34% despite a $1.5 billion legal charge for a Swedish court ruling.
What needs adjusting: the quarter included a $99.0 billion gain on equity holdings — 2.4 times operating income. Per the filing, it came mainly from upward revaluation of the investment in SpaceX and in a private company the filing does not name. It is an accounting gain, not cash received. Per the earnings release, it added $6.26 to the quarter's EPS (of $9.11), and in Q1 it added $2.35 (of $5.11). Excluding the revaluation, EPS for the quarter was about $2.85.
| $ millions | Q2-25 | Q3-25 | Q4-25 | Q1-26 | Q2-26 |
|---|---|---|---|---|---|
| Revenue | 96,428 | 102,346 | 113,828 | 109,896 | 119,796 |
| Year-over-year growth | 14% | 16% | 18% | 22% | 24% |
| Operating income | 31,271 | 31,228 | 35,934 | 39,696 | 40,770 |
| Operating margin | 32.4% | 30.5% | 31.6% | 36.1% | 34.0% |
| Gain on equity securities | 1,286 | 10,734 | 2,302 | 36,915 | 99,031 |
| Diluted EPS ($) | 2.31 | 2.87 | 2.82 | 5.11 | 9.11 |
Q3 2025 is derived as the full year less the other three quarters. Sources: earnings releases, 10-K, 10-Q.
The multi-year context
In 2023–2025 revenue grew 9%, 14% and 15%. In the first half of 2026 growth reached 23%. At the same time the relationship between operating cash flow and capital spending changed: in 2023, 32% of operating cash flow went into property and equipment; over the last 12 months, 71%.
| $ billions | 2021 | 2022 | 2023 | 2024 | 2025 | TTM to 6.2026 |
|---|---|---|---|---|---|---|
| Revenue | 257.6 | 282.8 | 307.4 | 350.0 | 402.8 | 445.9 |
| Operating income | 78.7 | 74.8 | 84.3 | 112.4 | 129.0 | 147.6 |
| Operating cash flow | 91.7 | 91.5 | 101.7 | 125.3 | 164.7 | 185.7 |
| Capital expenditures | 24.6 | 31.5 | 32.3 | 52.5 | 91.4 | 132.4 |
| Free cash flow | 67.0 | 60.0 | 69.5 | 72.8 | 73.3 | 53.3 |
| Share repurchases | 50.3 | 59.3 | 61.5 | 62.2 | 45.7 | 0 in H1 2026 |
Balance Sheet & Capital — מאזן ומבנה הון
In six months total assets grew from $595 billion to $922 billion. At June 30, 2026 Alphabet held $155.4 billion in cash and marketable debt securities (excluding equity holdings) against $100.2 billion of debt — net cash of about $55 billion. It also held $232.7 billion of equity securities: SpaceX shares worth $94.1 billion, subject to sale restrictions, and $131.5 billion of non-marketable equity, mostly an investment in a single private company. The original cost of the non-marketable equity is $47.6 billion.
A change in funding sources. In 2021–2024 the company repurchased $50–62 billion of stock a year. In the first half of 2026 there were no repurchases. In June 2026 the company raised equity:
- Common stock: 58 million shares in a public offering at about $352–355, and 28 million shares in a private placement with an affiliate of Berkshire Hathaway ($10 billion). $30.5 billion net in total.
- Mandatory convertible preferred stock: $19.1 billion net, 6.25% annual dividend, converting into common stock in May 2029. The company bought capped call transactions that limit dilution up to a price of about $530.
- At-the-market program (ATM): up to $40 billion. Per the company, about $30 billion of it is intended for tax obligations on employee equity vesting in 2026. No shares were sold through June 30.
Debt: face value rose from $49 billion at the end of 2025 to $101 billion in June 2026, issued in six currencies, including Sterling notes maturing in 2126. Another $25 billion was issued in August 2026. Quarterly interest expense: $1.28 billion, against $0.26 billion a year earlier.
Off-balance-sheet obligations: purchase and contractual commitments rose from $149.1 billion at the end of 2025 to $811.0 billion in June 2026, mostly long-term infrastructure supply agreements through 2030. In addition: leases not yet commenced of $85.2 billion, credit backstops for third-party data centers of $43.8 billion plus $24.1 billion agreed, energy-related guarantees of $7.6 billion, and a $20 billion funding commitment to the private company through 2030, subject to milestones.
Segments — פילוח מגזרי
Alphabet reports three segments. The cost of developing its general AI models (Gemini) is not allocated to segments and sits at the Alphabet level — $5.8 billion in the quarter, up 72%.
| Q2, $ millions | Revenue 2025 | Revenue 2026 | Change | Op. income 2025 | Op. income 2026 |
|---|---|---|---|---|---|
| Google Services | 82,543 | 94,540 | +15% | 33,063 | 39,544 |
| Search & other | 54,190 | 63,271 | +17% | — | — |
| YouTube ads | 9,796 | 11,055 | +13% | — | — |
| Google Network | 7,354 | 7,303 | −1% | — | — |
| Subscriptions, platforms & devices | 11,203 | 12,911 | +15% | — | — |
| Google Cloud | 13,624 | 24,768 | +82% | 2,826 | 8,814 |
| Other Bets | 373 | 382 | +2% | (1,246) | (1,799) |
| Alphabet-level activities | — | — | — | (3,372) | (5,789) |
Cloud: three components sit inside the 82%. First, infrastructure and platform services, which the filing names as the main driver. Second, in Q2 the company began recognizing revenue from sales of TPU systems to customers, and per the filing the "significant majority" of revenue from those agreements will be recognized in 2027. Third, Wiz, a cloud-security company acquired for $29.5 billion and consolidated from mid-March 2026. The filing does not disclose the amounts for TPU sales or Wiz, so it is not possible to tell what share of the growth and margin recurs quarter to quarter. Inventory rose from $2.4 billion to $10.0 billion in six months.
Services: segment margin 41.8%, or 43.4% excluding the legal charge. Network revenue declined: impressions fell 12% and cost per impression rose 13%.
Competitive Position — מיצוב תחרותי
The differentiation the company presents is a "full stack" approach to AI: its own chips (TPU), its own models (Gemini), cloud infrastructure, and consumer products with billions of users through which the models reach an audience. Per the earnings release, the Gemini app reached 950 million monthly users, and the models process 22 billion tokens per minute through the developer API, versus 10 billion in Q4 2025. These are company-reported figures, not audited data.
Where the filings show pressure: a U.S. federal court ruled in 2024 that Google holds a monopoly in search, and the December 2025 final judgment imposed limits on distribution agreements and requires sharing search data and providing search syndication to competitors. Both sides appealed. In the advertising-technology case a remedies ruling is pending, and the Department of Justice is seeking structural remedies which, per the company, could have a material adverse effect. In the EU: a €4.1 billion Android fine became final and was paid in July 2026; a €3.0 billion ad-tech fine is on appeal; and two Digital Markets Act investigations are open.
In Cloud, Alphabet competes with other large cloud providers. This review does not include market-share data from a primary source.
How to Think About This Company — איך לחשוב על החברה הזו
For Alphabet in 2026, the central question is how much of the business's cash flow is left for shareholders. The operating business is growing faster than in any year from 2022 to 2025, and operating income rose 30%. At the same time the company has moved from returning most of its free cash flow to shareholders to investing almost all of it and raising outside equity and debt. Both facts are true at once; looking at only one of them gives half the picture.
The quarter's net income does not measure the business. A $99 billion revaluation gain is 2.4 times operating income. The reported trailing P/E (about 17) is shaped by that gain. Excluding revaluation, trailing-12-month EPS is about $10.5 and the multiple on it about 33. The year-end P/E for 2021–2025 ranged from 19 to 29, per stockanalysis.
Capital spending is the key variable. Over 12 months $132.4 billion went into property and equipment, 71% of operating cash flow. Per management, as quoted in the company's June 2026 release, 2026 capital expenditures will total $180–190 billion, and management indicated a further significant increase for 2027. Free cash flow was negative in Q2. Depreciation rose 42%, and $122.8 billion of assets are not yet in service and not yet being depreciated.
The contracted backlog is the other side of the investment. Cloud's revenue backlog rose to $513.9 billion. Per the filing, just over half will be recognized within 24 months — about $130 billion a year on average, against Cloud's annualized Q2 revenue of about $99 billion. On the other side, purchase commitments grew by about $660 billion in six months, the backlog by about $277 billion. The filing does not disclose how concentrated the backlog is among individual customers.
Cloud is more profitable — but what exactly is measured. Cloud margin rose from 20.7% to 35.6% in a year. Three things in the filing affect the reading: TPU sales recognized for the first time in the quarter, the Wiz acquisition, and the fact that general model-development costs are not allocated to Cloud. On the other hand, the annual report states servers are depreciated over six years, and the quarterly filings report no change to that estimate.
Equity holdings: balance-sheet value, not cash flow. $232.7 billion of equity holdings is about 5.5% of market capitalization. Against it stands a deferred tax liability, and SpaceX shares carry sale restrictions. The value of the large non-marketable holding is set by transactions in the investee's securities, and the filing does not identify it. Alphabet committed to invest up to $40 billion in it, of which $20 billion is still open and contingent on milestones.
The capital regime has changed. In the first half of 2026 there were no buybacks; instead, common and preferred stock of $49.6 billion net was issued, plus about $52 billion of debt (and another $25 billion in August). Tax payments on employee equity, which reached $12.1 billion in the half, will per the company be funded partly by selling shares in the market. Shares outstanding rose 1.2% in six months.
Search is holding up, and the legal question is open. Search — about 53% of revenue — grew 17%, faster than in 2025. On the other hand, the search judgment's remedies are not yet fully implemented, and in the ad-tech case remedies have not yet been set. Their effect on Network and Search revenue cannot be quantified from the filing.
The control structure. The founders hold a majority of the voting power, and GOOG shares carry no vote at all. Decisions such as the June 2026 equity raise are made in a structure in which minority shareholders have no practical influence.
This framework is intended to structure analysis, not to produce an investment conclusion. It does not take part in the decision — the decision is the reader's.
Risks & Monitoring — סיכונים ונושאים במעקב
Risks arising from the filings
- Scale of investment: the filing adds a new risk factor — possible excess capacity that cannot easily be redeployed if customers or counterparties do not perform.
- Backstops and commitments: credit backstops for third-party data centers ($43.8 billion, plus $24.1 billion agreed), purchase commitments of $811 billion, and leases not yet commenced of $85.2 billion.
- Funding and dilution: a new reliance on capital markets; an ATM program of up to $40 billion; conversion of the preferred stock in 2029; a 200-million-share increase in the employee stock plan reserve.
- Earnings volatility: equity revaluation can reverse, and the company itself notes it may add volatility.
- Antitrust: remedies in the search case, possible structural remedies in the ad-tech case, EU proceedings, and private claims (such as PriceRunner, $2.1 billion).
- Depreciation: $122.8 billion of assets not yet in service will enter depreciation when placed in service.
Items to monitor in the Q3 report (late October 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | Quarterly free cash flow | −$5.9 billion |
| 2 | Capital expenditures and management's comments on 2026 and 2027 | $44.9 billion in the quarter; $180–190 billion for 2026 per management |
| 3 | Cloud revenue and margin, and any TPU or Wiz disclosure | $24.8 billion; 35.6%; not disclosed |
| 4 | Backlog vs. purchase commitments | $519.5 vs. $811.0 billion |
| 5 | ATM sales and share count | 0; 12,230 million |
| 6 | Equity revaluation gain | $99.0 billion |
| 7 | Quarterly depreciation | $7.1 billion (+42%) |
| 8 | Search: paid clicks and cost per click | +13% / +3% |
| 9 | Remedies ruling in the ad-tech case | Pending |
Scenario Framework — מסגרת תרחישים
The scenarios below are descriptive, not predictive. They include no prices, no probabilities, and no ranking of outcomes. Their only purpose is to lay out the conditions that would need to hold for each state to materialize, so they can be checked against future filings.
Scenarios are descriptive, not predictive.
- If the backlog converts to revenue at the pace the company describes, and Cloud margin holds at a similar level after new assets enter depreciation
- If free cash flow turns positive again and grows, without shifting investment into leases and backstops
- If Search keeps growing after the search-case remedies are implemented
- If the company discloses TPU and Wiz revenue, and growth excluding them stays high
- If revenue keeps growing at a double-digit pace, and capital spending keeps absorbing most of the cash flow
- If funding relies on a mix of cash flow, debt and at-the-market share sales
- If net income keeps moving mainly with the revaluation of holdings
- If the legal proceedings continue without a final resolution
- If backlog growth slows while purchase commitments keep rising
- If Cloud margin declines as depreciation grows and TPU sales weaken
- If the value of the equity holdings falls and negative revaluation flows into earnings
- If structural remedies are imposed in the ad-tech case, or the search-case remedies hurt distribution
Analytical Lens — עדשה אנליטית
The six questions below are the same in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as any other company.
Key Observations — תצפיות עובדתיות
1. In the April–June 2026 quarter Alphabet reported revenue of $119.8 billion (+24%) and operating income of $40.8 billion (+30%). Cloud revenue rose 82% to $24.8 billion, at a 35.6% operating margin.
2. Quarterly EPS of $9.11 includes, per the earnings release, $6.26 from revaluation of equity holdings. Over the last 12 months net income was $244.2 billion and operating cash flow $185.7 billion.
3. Capital expenditures over 12 months totaled $132.4 billion and free cash flow $53.3 billion. In Q2 free cash flow was negative (−$5.9 billion). In the first half of 2026 there were no buybacks, and common and preferred stock of $49.6 billion net was issued.
4. At June 30, 2026 the contracted revenue backlog stood at $519.5 billion and purchase and contractual commitments at $811.0 billion, versus $242.8 and $149.1 billion at the end of 2025. Debt face value rose from $49 to $101 billion, and another $25 billion was issued in August.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held an investment advisory license from 2008 to 2023. As of the publication date of this document, the company does not hold an investment advisory, investment marketing, or portfolio management license.
This document is intended for research and professional education purposes only. Nothing herein constitutes a recommendation to buy, sell, hold, or take any action in securities. It is not a substitute for advice that takes into account each person's individual data and needs. Any decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data was drawn from official sources: the Form 10-Q for the quarter ended June 30, 2026 (filed July 23, 2026), the Form 10-Q for Q1 2026, the Form 10-K for 2025 (February 5, 2026), the quarterly earnings releases, and the company's Form 8-K filings with the U.S. Securities and Exchange Commission. Historical multiples: stockanalysis.com. Filing updates published after this date are not included.
Qualified-Client Review — Family Office
The full analytical review of Alphabet — Google (GOOG) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company", a structured scenario framework, and a 6-dimension Analytical Lens.
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