Alphabet-Heavy ETFs to Consider as Capex Woes Offset Cloud Strength

He also highlighted the growing adoption of Gemini Enterprise, noting that nearly 90% of the Fortune 100 companies are now using it. Pichai noted that Gemini models now process 22 billion API tokens per minute and the Gemini app boasts 950 million monthly active users.

However, GOOGL shares declined about 5% in pre-market trading on July 23. Despite delivering better-than-expected results, investors reacted negatively to the company's decision to raise its capital expenditure for 2026.

The move reinforces a broader trend across the technology sector, where investors have grown increasingly concerned about the escalating AI-related spending by Big Tech and increasing skepticism about the near-term payoff from AI investments. The tech giant's shares also came under pressure in pre-market trading amid investor concerns over reports of continued delays to its next flagship AI model, Gemini 3.5 Pro.

Snapshot of Q2 Earnings

Alphabet posted revenues of $103.62 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate of $101.28 billion by 2.31%. This marked a substantial increase of 26.79% from the year-ago quarter.

Alphabet’s net income for the quarter saw a substantial surge of about 297.59% from the year-ago quarter to $112.11 billion. The tech giant’s operating income for the quarter was $40.77 billion, which marked an increase of 30.38% from the year-ago quarter.

Segment Snapshots

Second-quarter revenues from Google advertising reached $81.63 billion, up 14.42% from the year-ago quarter. The segment includes Google Search & other, YouTube ads and Google Network. Revenues from Google Search & other, which reached $63.27 billion in the second quarter, marked a rise of 16.76% from $54.19 billion in the year-ago quarter, while YouTube ad revenues increased 12.85%, to reach $11.06 billion in the second quarter.

Revenues from Google Services, which includes Google advertising and Google subscriptions, platforms and devices, increased 14.53% from the year-ago quarter, reaching $94.54 billion. Operating income from the segment reached $39.54 billion for the quarter ended June 2026, marking an increase of 19.6% from the prior-year figure of $33.06 billion.

Alphabet’s Google Cloud business witnessed a substantial surge, with operating income increasing to $8.81 billion, an impressive 211.89% increase from the prior-year figure of $2.83 billion. Revenues from the Cloud segment also witnessed a substantial rise of 81.79% year over year to $24.77 billion. The segment’s revenues surpassed the Zacks Consensus Estimate of $22.77 billion by 8.77%.

The rise in Google Cloud’s revenues was driven by an increase in Google Cloud Platform (GCP) across enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.

Capex Surge Remains a Key Investor Concern

Alphabet reported capital expenditures of $44.92 billion for the quarter ended June 2026, nearly doubling from $22.45 billion in the year-ago quarter. Through the first half of 2026, the company's capital expenditures totaled $80.59 billion.

As quoted on a Reuters article, according to the tech giant’s CFO Anat Ashkenazi, Alphabet also raised its full-year capital expenditure outlook. Speaking on a conference call with analysts, Ashkenazi stated that the company now forecasts capex of $195 billion to $205 billion this year, up from its previous guidance of $180 billion to $190 billion for 2026.

Ashkenazi reaffirmed that Alphabet expects another meaningful step-up in capital expenditures in 2027. According to the abovementioned Reuters article, despite being one of the best-performing Magnificent Seven stocks this year, Alphabet's shares have come under pressure since late April amid concerns over delays to Gemini, high-profile executive departures and rising regulatory scrutiny.

Alphabet’s Stock Outlook

Alphabet currently has an average brokerage recommendation (ABR) of 1.25 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 55 brokerage firms. The current ABR compares to an ABR of 1.29 a month ago based on 55 recommendations.

Of the 55 recommendations deriving the current ABR, 46 are Strong Buy and four are Buy. Strong Buy and Buy, respectively, account for 83.64% and 7.27% of all recommendations. A month ago, Strong Buy made up 81.82%, while Buy represented 7.27%, indicating that the majority of the analysts remain bullish.

Based on short-term price targets offered by 51 analysts, the average price target for Alphabet comes to $434.82, ranging from a low of $365.00 to a high of $515.00. The average price target represents an increase of 27.11% from the last closing price of $342.09 (as of market close on July 22).

ETFs to Explore

Here, we have highlighted ETFs with heavy exposure to Alphabet.

Global X PureCap MSCI Communication Services ETF GXPC has an exposure of 31.45% to GOOGL.

VanEck Communication Services TruSector ETF TRUC has an exposure of 14.28% to GOOGL.

Vanguard Communication Services ETF VOX has an exposure of 14.4% to GOOGL.

Fidelity MSCI Communication Services Index ETF FCOM has an exposure of 14.28% to GOOGL.

iShares Global Comm Services ETF IXP has an exposure of 12.22% to GOOGL.

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This article originally published on Zacks Investment Research (zacks.com).

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