Alphabet raised its 2026 investment forecast to a range of $195 billion to $205 billion, up from a previous estimate of $180 billion to $190 billion, as Google CEO Sundar Pichai signaled that the next leap in AI will demand significantly more computing power.
The parent company of Google reported Q2 2026 revenue of $119.8 billion, a 24% year-over-year increase that beat analysts' expectations of $116.9 billion. The strong performance was driven by Google Cloud, which posted $24.8 billion in revenue, representing 82% growth. The Services segment brought in $94.5 billion, up 15% from the same period last year.
Gemini 4: "Most ambitious pre-training run yet"
Pichai told investors on the earnings call that the next generation of frontier AI models requires much larger base models. Google is currently 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.
The CEO acknowledged that Google needs to improve in specific areas. "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."
Google plans to ship new models monthly, though the Gemini 3.5 Pro model currently being tested is not part of that cadence. The recent release of Flash 3.6 showed efficiency gains, and Pichai noted strong demand for the workhorse series.
"We're seeing tons of demand for our workhorse Gemini Flash series because it hits the sweet spot of performance and cost," he said.
AI features drive user growth and search queries
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The Gemini app now has 950 million monthly active users, up from 750 million in February. AI Mode in Google Search crossed 1 billion monthly active users since its global launch in October.
Google claims AI Mode, like AI Overviews before it, is driving more overall search queries. The company says it sends billions of clicks to websites every week through AI features in Search, though without specific data or comparisons to traditional search volume, that claim doesn't tell us much.
The cost per AI response in AI Mode dropped to its lowest level since launch, even as Google uses more powerful models in the feature. Over time, that efficiency could give Google an edge on margins for serving AI.
Alphabet says AI is unlocking billions of new search queries previously hard to monetize. The AI Max ad product left beta and now has 500,000 advertisers using it.
Investment race and the frontier question
Demand continues to outpace investment, according to Alphabet. The raised 2026 capital expenditure forecast of $195 billion to $205 billion reflects the company's bet that building larger base models is essential for staying competitive.
The question remains 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. Google bets on Gemini 4 to close the gap with frontier rivals.