Alphabet Smashes Earnings, Capex Sinks Stock. Too Much Too Soon?Alphabet Inc. Class ANASDAQ:GOOGLTradingViewAlphabet GOOGL delivered the sort of earnings report most companies would happily frame on the office wall. Revenue topped expectations, cloud growth accelerated, profits surged (and then some) and advertising remained remarkably resilient. Yet instead of celebrating, investors hit the sell button. Sometimes Wall Street behaves like a restaurant critic. The meal was excellent, but the bill arrived at the end and soured the mood. Shares slipped 4% after-hours as Alphabet lifted its capex guidance yet again, reminding investors the AI race is won by whoever writes the bigger check. 💰 A Quarter Packed With Fireworks Alphabet, the newest member of the Dow Jones DJI, reported second-quarter revenue of $120 billion, comfortably ahead of Wall Street's $117 billion estimate and up 24% from a year ago. Adjusted earnings reached $9.11 per share, crushing forecasts of $2.89. However, there's an important footnote. The figure included $6.26 per share in gains tied to Alphabet's investment portfolio, meaning it wasn't purely generated by the company's day-to-day operations. The real headline sat elsewhere on the income statement. Alphabet booked nearly $98 billion in "other income," largely thanks to a $99 billion gain on equity securities. That includes investments in companies such as Anthropic (not yet public, but going there) and SpaceX SPCX (obviously public, but definitely underwater). Anyway, those gains helped lift quarterly profit to more than $112 billion, almost triple last year's figure. Strip those investment gains away and adjusted operating earnings paint a more modest — but still solid — picture. ☁️ Cloud Keeps Flying, AI Keeps Spending Google's cloud business once again stole the show. Cloud revenue jumped 82% year over year to $24.8 billion, comfortably beating expectations and providing another sign that businesses continue spending aggressively on artificial intelligence infrastructure. Advertising, Google's traditional cash machine, also remained healthy, generating $81.6 billion, while Search revenue landed just shy of analysts' forecasts. The company also revealed that its Gemini AI app now serves 950 million monthly active users and processes an astonishing 22 billion tokens every minute. Tokens are simply chunks of text—words or pieces of words—that AI models read and generate while answering questions or creating content. 🏗️ Capex: the Main Character Alphabet spent $44.9 billion on capital expenditures during the quarter, more than doubling last year's figure as it pours money into AI data centers, chips and networking infrastructure. While that number was roughly in line with expectations, management raised its full-year capex outlook to $195 billion-$205 billion, up from the previous $180 billion-$190 billion range. Capex, short for capital expenditures, is money spent on long-term assets that help grow the business, such as servers, data centers and specialized AI hardware. Those investments are already showing up elsewhere. Alphabet posted negative free cash flow of $5.9 billion, meaning the company spent more cash than it generated during the quarter as it accelerated its AI buildout. 🤖 The AI Arms Race Is Only Accelerating Alphabet also hinted that even its enormous spending may not be enough. Management said it plans to rely more heavily on third-party cloud providers to satisfy surging AI demand, following a path already taken by Microsoft through partnerships with companies such as CoreWeave CRWV, Nebius NBIS, Iren IREN, and others. Investors welcomed that prospect, sending CoreWeave CRWV and Nebius NBIS shares higher in extended trading. Meanwhile, earnings season continues to separate winners from laggards. Tesla TSLA, reporting on the same evening, slipped roughly 5% after missing earnings expectations despite beating revenue forecasts. Off to you: Alphabet's smash quarter meets a capex gut-check. Worth the selloff? Share your views in the comments!