Alphabet Gears Up for Q2 Earnings Amid Legal Onslaught and Data Center Moratorium

Alphabet is heading into its second-quarter earnings release on July 21 with a powerful operational tailwind, but the glare of fresh legal and regulatory challenges is threatening to overshadow the numbers. The Google parent will report after the US market close, with analyst consensus calling for earnings per share of $2.87 on revenue of $116.53 billion — a jump of more than 21% from the same period last year. The conference call with investors follows on July 22 at 4:30 p.m. Eastern.

The optimism is anchored in a blockbuster first quarter, during which Alphabet delivered $5.11 per share, nearly doubling the $2.68 consensus estimate, and revenue of $109.9 billion. Google Cloud was a standout, surging 63% to $20 billion and swelling the division’s backlog to $462 billion. To keep pace with AI infrastructure demand, the company has raised its 2026 capital expenditure plans to between $180 billion and $190 billion, with further increases flagged for 2027.

Yet for all that momentum, a pair of headwinds has emerged that could test investor patience. On July 14, a group of publishers including Hachette, Cengage, and Elsevier, together with author Scott Turow and the organization S.C.R.I.B.E., filed a class-action lawsuit in the U.S. District Court for the Southern District of New York. They accuse Google of using copyrighted material without permission to train its Gemini AI model, and of deliberately stripping or altering copyright management information to conceal the practice. Internal documents cited in the complaint allegedly warned of potential damages ranging from $10 billion to $100 billion.

The case is particularly sensitive because the plaintiffs have long supplied Google with books for its Google Books search service — content the suit claims was then repurposed for Gemini training. Google also stands accused of pulling works from the Play Store into its AI pipeline. The venue matters: unlike earlier fair-use rulings in California that favored AI companies, the New York court may weigh the existing licensing relationship between the parties. A parallel case against Anthropic saw a proposed $1.5 billion settlement rejected by a judge in 2025 as far too low, raising the stakes for Alphabet.

Separately, Alphabet faces a regulatory clampdown on the infrastructure that powers its AI ambitions. New York became the first U.S. state to impose a one-year moratorium on the construction of large data centers, citing rising electricity costs, water scarcity, and community strain. Governor Kathy Hochul is also pushing to eliminate tax breaks for big data centers across the state. The move directly impacts Alphabet, along with Microsoft, Amazon, and Meta — the four largest cloud operators collectively managing more than $11 trillion in market capitalization and planning over $300 billion in data center investment.

Should investors sell immediately? Or is it worth buying Alphabet?

On the other side of the Atlantic, Europe has added its own weight. In early July, the European Union’s highest courts upheld a €4.1 billion antitrust fine against Google for abusing its market dominance in search and shopping. Switzerland’s competition commission, WEKO, also opened a preliminary investigation this week after Google removed the search-engine choice screen on Android devices in the country — a function that remains in place in the European Economic Area.

Despite these clouds, analysts remain largely bullish. MarketBeat data shows 27 analysts rate the stock a Buy and five a Strong Buy, with four neutral. Price targets cluster between $378.53 and $413.73, while TipRanks reports an average target of $428.43. Raymond James recently reiterated a Strong Buy with a $425 target, Truist sees $430, and Zacks upgraded Alphabet to Strong Buy. Not all are convinced: Freedom Capital downgraded to Hold. Insider transactions showed sales of roughly 159,415 shares in the first quarter, while funds like AlpenGlobal Capital added to positions and Kornitzer Capital Management trimmed by 2.6%.

On the product side, Alphabet continues to push its AI agenda. An unannounced Gemini 3.5 Pro model with an expanded context window is reportedly near release. Google Cloud’s Model Garden now offers Anthropic’s Claude models as a managed service, and IDC named Alphabet a leader in its MarketScape for foundation-model software. But the talent drain persists: key DeepMind researchers Noam Shazeer and John Jumper have departed for OpenAI and Anthropic, respectively, pressure that weighed on the stock in late June.

Shares of Alphabet last traded at €313.70, down 0.35% on the day, and sit about 1.8% below their 50-day moving average of €321.15. They remain well above the 200-day average of €277.48, and the stock has nearly doubled over the past 12 months, gaining around 99.7%. The relative strength index of 49.4 sits in neutral territory, suggesting the market has yet to fully price in the legal and regulatory risks — a gap that could widen as the Q2 report and the New York lawsuit move into sharper focus.