Tesla and Alphabet Earnings Roundup - July 22, 2026
Author: Kathleen Brooks, Research Director UK
Market Overview
The tech earnings season has begun, but initial reactions to the results from Tesla and Alphabet have disappointed investors, with both companies' share prices dropping over 4% in after-market trading.
Alphabet Inc. (GOOG.US)
Financial Performance
Alphabet reported Q2 earnings that exceeded expectations, with revenues of $119.80 billion, surpassing the anticipated $116.93 billion. Notably, search revenue increased by 17%, and cloud revenue surged by 82% to $24.8 billion.
Investor Concerns
Despite the strong revenue figures, investors were unsettled by a significant increase in capital expenditure (capex) plans, which were revised from $195 billion to $205 billion. This increase is attributed to heightened demand for AI services, but the market remains skeptical about the returns on these investments.
Search revenue for Q2 was slightly below analyst expectations at $63.3 billion, raising questions about how Alphabet's core business can sustain its AI investments.
AI Developments
Alphabet's cloud revenue continues to grow robustly, and the company reported 2.4 million weekly active users for its AI coding tool, Antigravity. However, the lack of clarity on how many of these users are paying subscribers has led to further skepticism among investors.
Additionally, Alphabet's AI tool faces stiff competition from other market players, such as OpenAI's Codex and ChatGPT Work agent, which boast higher user engagement.
Semiconductor Market Outlook
Despite current fears in the semiconductor market, there is potential for a rebound as Google and other tech giants are expected to increase capex spending, which could benefit semiconductor stocks and boost US stock indices.
Tesla Inc.
Financial Performance
Tesla's Q2 earnings report revealed weaker-than-expected results, with revenue of $28.24 billion, surpassing estimates of $25.71 billion, but earnings per share fell short at $0.33 compared to the expected $0.51.
Challenges Faced
Despite record vehicle deliveries, Tesla's profits declined by 5%, and gross margins fell to 16.8%, below analyst expectations of 19.4%. The decline in average selling prices and lower regulatory credit revenue contributed to this downturn.
Increased operating expenses, driven by the ramp-up of production for the Robotaxi and the development of the Optimus humanoid robot, have raised concerns about Tesla's financial health.
Cash Flow Concerns
Tesla reported a negative free cash flow of $1.1 billion, a significant drop from a positive $1.44 billion in the previous quarter. This has led to questions about the sustainability of Elon Musk's ambitious plans for the company.
Conclusion
Overall, the disappointing earnings from both Alphabet and Tesla suggest that the AI trade may be on shaky ground, with investors reacting negatively to the results. The future outlook for both companies will depend on their ability to manage costs and deliver attractive returns on their investments in AI and other technologies.