Stock is down 15% from its peak. Earnings land Wednesday after the close. Revenue estimate is $117 billion. But the number investors are actually watching is how much Alphabet plans to spend on AI infrastructure for the rest of the year.
Alphabet Stock Trades 15% Below Its Record High Ahead of Earnings
Alphabet shares were little changed in premarket Monday but sitting roughly 15% below the record high above $400. Meaningful pullback from the top heading into what could be a defining earnings report.
Broader tech weakness over the past two weeks created that gap. Chip selloff. AI trade getting questioned. Netflix disappointing. IBM crashing. Investors trimming exposure to expensive growth names across the board. Alphabet got pulled lower with the sector even though its specific business has not changed.
15% below record going into earnings creates a specific setup. Stock has already been partially de-risked by the pullback. If results are strong the recovery has room to run. If results disappoint there is probably more downside because the pullback did not fully reset valuation concerns.
What Analysts Expect From Alphabet Earnings This Week
Earnings per share consensus is $2.87. Revenue expected at $117 billion. That is about 6% growth from the same quarter last year.
6% revenue growth sounds modest for a company of Alphabet’s ambitions. Context matters though. $117 billion in quarterly revenue from a company that runs the world’s dominant search engine, a fast growing cloud business, and YouTube is not modest in absolute terms. 6% growth on that base is real money.
Problem is Wall Street rarely grades big tech on simply meeting estimates. At a premium valuation investors expect to see clear evidence of acceleration not just steady growth. A clean beat with strong cloud numbers and evidence that AI features are driving incremental revenue would be the ideal outcome.
Anthropic and SpaceX Investments Boosted Alphabet’s Q1 Profit
First quarter net income was a record $62.6 billion. Impressive headline number. But nearly half of it came from unrealized gains on Alphabet’s investments in Anthropic and SpaceX rather than from the core advertising and cloud business.
Alphabet owns roughly 14% of Anthropic. Anthropic’s valuation jumped from $380 billion at the end of Q1 to $965 billion after a new funding round. That increase flowed through as an accounting gain worth an estimated $80 billion on Alphabet’s books.
Unrealized gain means Alphabet did not sell anything and did not receive any cash. The higher valuation of Anthropic simply increased what Alphabet’s stake is worth on paper. Accounting rules require that to be reflected in reported earnings. Real but not the same as the core business generating that profit.
Q2 results will show whether the underlying advertising and cloud business is strong enough on its own without investment gains doing the heavy lifting. That is what investors actually want to know.
Alphabet Capex Guidance Could Be the Biggest Market Catalyst
Beyond the earnings result itself the capital expenditure guidance is what analysts and traders are focused on most.
AI infrastructure spending is the defining competitive variable right now. Companies that invest heavily in data centers, servers, and chips are positioning for the AI workload growth that everyone expects over the next several years. Companies that pull back on spending risk falling behind.
Analysts expect Alphabet could raise its 2026 capex guidance to roughly $200 billion. That is about 5% above previous expectations. Large number. But in the context of an AI race where Microsoft, Amazon, and Meta are all spending aggressively it is arguably what staying competitive requires.
Higher capex guidance has two possible market reactions. Investors read it as Alphabet doubling down on AI with confidence and bid the stock higher. Or investors read it as another massive spending commitment that squeezes near term margins and sell the stock on the news. Meta’s big capex announcement earlier this year initially scared investors before the market decided the spending was justified.
Alphabet’s Wednesday call will be watched closely for how management frames the spending. Confidence in AI returns versus concern about burning cash is the line executives will need to walk carefully.
Tesla Earnings Add Pressure to Wednesday’s Market Close
Alphabet shares the Wednesday after-close spotlight with Tesla. Two of the most followed stocks in the market reporting the same evening.
Tesla investors want vehicle demand trends, margin guidance, and any update on the energy storage business growth. Musk’s multiple roles across Tesla, SpaceX, and other ventures remain an ongoing concern for some holders.
Between Alphabet and Tesla Wednesday evening has enough material to significantly shift market sentiment heading into the back half of earnings season. Good results from both would help stabilize the AI trade narrative after a rough two weeks. Disappointments from either would likely extend the selloff in growth stocks.