📊 Google earnings preview: Cloud growth rate will shape the AI investment narrative

Market expectations are for Alphabet’s Q2 revenue and net profit to both rise by about 25%. Cloud business revenue is expected to grow nearly 65% to $22.4 billion, slightly accelerating from Q1’s 63%. But capital expenditures are also surging: in 2026, they could peak at $190 billion, and in 2027 they may reach $262 billion—close to three times 2025.
The stock price rose 11% in 2026, but it is already down 14% from the May high, reflecting the market’s concerns about the return on investment. The current P/E is 23x, above the 10-year average of 21x, matching the Nasdaq 100; pricing already includes expectations that cloud growth will keep accelerating.
Key to watch: whether cloud growth can exceed 65%, and whether search ads remain solid. If cloud growth falls below 60%, the 23x PE could face adjustment. Evercore believes the cloud outlook still has upside potential, but the market needs to see hard-cash revenue conversion.
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