AI's Next Test: Alphabet Earnings 7/22/26

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**Scott Wapner** (1:00)
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**Leslie Picker** (1:15)
Thank you, Carl and Sarah. Welcome to the Halftime Report. I'm Leslie Picker. In for Scott Wapner today, front and center this hour, the ABCs of earnings season with Alphabet kicking off the big tech earnings gauntlet after the bell today. The Investment Committee is here to break down what is at stake. Joining me for the hour, Joe Terranova, Liz Thomas, Jenny Harrington and Steve Weiss. Let's go to check on the markets which have bounced a bit off session lows. You could see the NASDAQ trying to get into positive territory, essentially flat at this hour. The S&P up 0.2 percent, the Dow up about 0.4 percent, the Russell slightly in the negative. We begin with Alphabet, and whether tonight's report will set the tone for second quarter earnings season. Let's get right to Mackenzie Segalos with the key things to watch from tonight's report. Mack.

**Mackenzie Segalos** (1:59)
So Leslie, Alphabet kicks off hyperscaler earnings after the bell, giving investors their first real test of how much more AI spending they are willing to stomach. The setup is already fragile. The Mag7 lost a record 2.3 trillion last month as investors rotated away from the companies funding this AI buildout. Alphabet is the clearest stress test. CapEx more than doubled last quarter. It's raised more than 140 billion in debt and equity. And free cash flow could flip negative next year. The street needs proof that demand is catching up. Cloud growth expectations are north of 60%. Backlog is 460 billion as of last quarter. And investors need to see capacity coming online without margins buckling under higher component costs. Google also playing from behind at the cutting edge of Frontier AI. But it's undercutting Chinese open source rivals on price. The question is whether that can pull more enterprise workloads into Google Cloud and what the economics of powering Apple's Siri ultimately look like. Another CapEx increase is expected. How the stock reacts could either reinforce confidence in the hyperscaler build out or undermine it. And of course, search still accounts for the lion's share of revenue. So we'll be looking to see if it hits that street target of 63 billion. Leslie?

**Leslie Picker** (3:12)
Yeah, Mac, really critical report. Thanks for staying all over at McKenzie Segalos for us. Joey, I want to turn to you. You're a shareholder.
What's the key thing you're looking for from tonight's report?

**Joe Terranova** (3:22)
Oh, it's clearly, are we monetizing the spend via cloud growth? And can that cloud growth come in much higher than the consensus expectation of 63 percent? Can we touch the whisper number at 70 percent? And then what's the impact of the internal usage for TPUs, the Tensor Processing Units? Does that mean that CAPEX is a little bit lower than some of the hyperscalers? That could certainly ignite further gains for Alphabet. Collectively, though, as it relates to the AI universe, memory names, semi-equipment and the momentum factor itself, we want to see a continuation of the hyperscalers spend. The offset of that ultimately is that hits the restart button on the pause and it allows the momentum factor to refresh.

**Leslie Picker** (4:11)
So, Weiss, the whole construct of Alphabet's earnings to be show your ROI and then tell us what you're going to do on CapEx because without that ROI, CapEx, you know, it could go either way, right?

**Steve Weiss** (4:25)
Right. You're suggesting the ROI on the CapEx.

**SPEAKER_2** (4:28)
Yes.

**Leslie Picker** (4:29)
Prove the ROI and then we'll give you a pass for higher CapEx.