GOOG · 10-Q · 2026Q2 · Full report

Gross Margin Drivers

Alphabet Inc. · 2026-07-23 · Importance 49 · Surprise 22 · Contradicted

Second-quarter cost of revenues increased $6.9 billion year over year to $45.9 billion, driven by $5.4 billion of higher other costs of revenues and $1.5 billion of higher traffic acquisition costs. Other cost increases reflected higher depreciation, inventory and hardware costs, YouTube content acquisition costs, and technical-infrastructure operating costs. The TAC rate declined from 20.6% to 19.8% because revenue mix shifted from Google Network properties toward Google Search & other properties. Six-month cost of revenues increased $11.8 billion to $87.2 billion, including $8.9 billion of higher other costs and $3.0 billion of higher TAC.

Key facts

• Cost of revenues increased $6.9 billion from the three months ended June 30, 2025 to the three months ended June 30, 2026, with other cost of revenues up $5.4 billion and TAC up $1.5 billion. source
• Total cost of revenues for the three months ended June 30, 2026 was $45,943 million ($45.943 billion). source
• Other cost of revenues for the three months ended June 30, 2026 were $29,764 million ($29.764 billion). source

Impact estimates