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By Brian Nelson, CFA
Alphabet (GOOG) (GOOGL) recently reported first-quarter 2026 results that beat expectations on both the top and bottom lines. Consolidated Alphabet revenues increased 22% (19% in constant currency), to $109.9 billion, marking the company’s 11th consecutive quarter of double-digit expansion. Google Services revenue increased 16%, but the real takeaway in the report was the firm’s Google Cloud business. Google Cloud revenues increased 63% thanks to an increase in Google Cloud Platform (GCP) across enterprise AI Solutions and enterprise AI infrastructure, as well as core GCP services.
Management had the following to say about the quarter:
2026 is off to a terrific start. Our AI investments and full stack approach are lighting up every part of the business. Search had a strong quarter with AI experiences driving usage, queries at an all time high, and 19% revenue growth. Google Cloud revenues grew 63% with backlog nearly doubling quarter on quarter to over $460 billion. This was our strongest quarter ever for our consumer AI plans, driven by the Gemini App. Overall the number of paid subscriptions has now reached 350 million, with YouTube and Google One being the key drivers. Gemini Enterprise has great momentum with 40% quarter on quarter growth in paid monthly active users. And, finally, I’m pleased to see Waymo surpass 500,000 fully autonomous rides a week.
These outstanding results are built on our differentiated, full stack approach. Our first-party models, like Gemini, are now processing more than 16 billion tokens per minute via direct API use by our customers, up 60% from last quarter.
It’s really exciting to see how our AI investments are delivering value for our users, customers and business.
In the quarter, consolidated Alphabet operating income increased 30% as it drove a 2 percentage-point increase in its operating margin, to 36.1%. Other income was $37.7 billion driven primarily by net unrealized gains on non-marketable securities. Quarterly net income increased 81%, while earnings per share increased 82%, to $5.11. Alphabet ended the quarter with $126.8 billion in total cash, cash equivalents and marketable securities, while long-term debt was $77.5 billion.
Cash flow from operations in the quarter came in at $45.8 billion, up from $36.2 billion in last year’s quarter, while purchases of property and equipment was $35.7 billion, more than doubling last year’s mark. Free cash flow was $10.1 billion in the quarter. Alphabet raised its dividend 5% to a quarterly rate of $0.22 per share. Management updated its full year 2026 capital spending guidance on the conference call to the range of $180-$190 billion, up from $175-$185 billion previously. 2027 capital spending is expected to increase significantly from 2026 levels. Though an increased capital spending outlook may weigh down shares, its investments are paying off, and we continue to like Alphabet as a top weighting in the Best Ideas Newsletter portfolio.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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