Mumbai: Google’s advertising business posted another strong quarter, with revenue rising 14% year-on-year to $81.63 billion in Q2 2026, driven by AI-powered Search, stronger YouTube advertising and the early monetisation of Gemini-powered search experiences.
Advertising remained Alphabet’s largest revenue stream, accounting for 68% of total quarterly revenue, as the company accelerated the integration of Gemini across its search and advertising ecosystem.
Google Search and other advertising revenue increased 17% to $63.27 billion, contributing the bulk of the company’s advertising growth. YouTube advertising grew 13% to $11.06 billion, while Google Network revenue edged down 1% to $7.30 billion.
Search alone contributed nearly $9.08 billion of the $10.29 billion incremental advertising revenue generated during the quarter, highlighting AI-powered Search as Google’s primary growth engine.
Alphabet reported 24% growth in consolidated revenue to $119.80 billion, while Google Services, which includes advertising, subscriptions, platforms and devices, grew 15% to $94.54 billion. Operating income increased 30% to $40.77 billion, with operating margin expanding to 34%.
“Our AI investments are redefining what’s possible across every part of our business,” said Sundar Pichai, CEO of Alphabet and Google. “Our popular AI features are driving Search query growth.”
Pichai said AI Mode, now available globally, has surpassed one billion monthly active users, with both AI Mode and AI Overviews generating incremental search activity and billions of outbound clicks to websites every week.
AI search opens new advertising inventory
A key milestone during the quarter was Google’s move to begin monetising AI-generated search experiences.
Philipp Schindler, Chief Business Officer at Alphabet, said Gemini is helping Google understand longer, more conversational queries, allowing advertisers to reach searches that were previously difficult to monetise.
“AI Max continues to unlock… billions of net new searches that weren’t really monetizable before,” Schindler said.
Google has started testing sponsored links inside AI-generated answers through formats such as Highlighted Answers, while also introducing contextual sitelinks and Direct Offers, enabling brands to surface relevant deals within AI conversations.
The company said AI Max, now out of beta, has been adopted by more than 500,000 advertisers, while advertisers using AI Max and Performance Max are seeing 15% higher conversions or conversion value at similar returns on ad spend. Google also reported a 20% improvement in Shopping ad relevance through Gemini.
YouTube advertising crosses $11 billion
YouTube advertising revenue crossed the $11 billion mark for the first time, supported by growth in both brand and performance advertising.
Google said the FIFA World Cup boosted engagement, with 1.7 billion unique viewers watching tournament-related content on YouTube, including over 550 million viewers on connected TVs. Advertisers leveraged FIFA-themed takeovers, mastheads and Gemini-powered sponsorship formats during the event.
The company is also expanding commerce capabilities on connected television through Buy with Google Pay, enabling viewers to complete purchases directly from TV advertisements.
AI investments drive record capital spending
Alphabet’s AI expansion continued to fuel record infrastructure investments. Capital expenditure doubled to $44.92 billion during the quarter, prompting the company to raise its full-year capital expenditure guidance to $195-205 billion.
Nearly 60% of the planned investment will be directed towards servers, with the remainder allocated to data centres and networking infrastructure to support growing demand for AI services.
Google Cloud also continued its rapid expansion, with revenue surging 82% to $24.77 billion, reflecting strong enterprise demand for AI infrastructure and generative AI products.
Alphabet reported net income of $112.11 billion, although the figure included significant unrealised gains from equity investments. The company indicated that operating income remains the more representative measure of underlying business performance.
