Alphabet Inc - Ordinary Shares - Class C

Strong topline growth, margin resilience; margins partly lifted by investment mix and OI&E - Alphabet reported Q2 revenue of ~$119.8B (+24% YoY; +23% constant currency) and 12th straight quarter of double-digit growth. - Operating income ~$40.8B (+30% YoY) with operating margin ~34%. - Costs rose faster than revenue: total operating expenses ~$33.1B (+27%) and capex-heavy technical infrastructure is pressuring free cash flow. - Net income and EPS increased sharply, largely attributed to unrealized gains in equity investments (OI&E), which investors should treat as non-operating/mark-to-market volatility, not core operating improvement.

Core segments: Search/YouTube momentum and a very strong Cloud inflection - Google Services revenue ~$94.5B (+15%): - Search & other ads ~$63.3B (+17%) with retail/finance as key drivers. - YouTube ads ~$11.1B (+13%); network ads -1% YoY (mild drag). - Subscriptions & devices ~$12.9B (+15%), driven by YouTube Music/Premium and Google One AI plans. - Google Cloud revenue ~$24.8B (+82%) with operating income ~$8.8B and operating margin ~35.6% (up materially YoY). - Backlog jumped to ~$514B (up >$50B sequentially), driven by Enterprise AI demand; company expects to recognize just over 50% of backlog over the next 24 months. - Surprising/important: Cloud growth remained strong even after excluding TPU system sales impacts, implying a real underlying demand engine beyond product deliveries.

AI demand is real but the bottleneck is supply (compute); massive usage signals ROIC runway - Company continues to be supply constrained, which management frames as a positive signal of rapid adoption (i.e., demand > supply). - Model/API usage accelerated: developer activity >9M devs building monthly and ~22B tokens processed per minute/period (“permanent” wording in transcript) vs ~$16B last quarter (material sequential jump). - Enterprise adoption highlight: ~90% of Fortune 100 using Gemini Enterprise. - Gemini app engagement: ~950M monthly active users; daily actives tripled YoY. - Opportunity theme: management emphasizes full-stack AI (models + chips + data + security + agent platforms) creating differentiated customer value, especially in Cloud.