#微软谷歌财报即将揭晓 Google Earnings Preview: Cloud Business Surges 91%, Can Its AI Gamble Pay Off?

On October 28, after the U.S. market closes, Google parent Alphabet will report its third-quarter earnings. This time, the market's focus on October 2 is no longer just whether revenue and profit will beat expectations, but more importantly: how much commercial return can Google’s massive investment in artificial intelligence deliver? Market expectations suggest Google’s third-quarter revenue could reach $127.85 billion, up 24.9% year over year; net income is expected to come in at $37.33 billion, up 6.73%. If these forecasts are met, Google’s overall performance will remain quite strong. But the market reaction may hinge on several key metrics.
I. Google Cloud: The Core Engine of AI CommercializationThe biggest highlight of this earnings report is undoubtedly Google Cloud. The market expects Google Cloud’s third-quarter revenue to reach $29 billion, surging 91.3% year over year. If this figure is met, it would mean Google Cloud is still growing at a very rapid pace. Even more noteworthy is profitability. Google Cloud’s operating margin has climbed steadily from 3.2% in 2023 to 35.6%, reflecting the business’s gradual shift from a high-investment phase toward profitability at scale. Meanwhile, Google Cloud’s remaining performance obligations (RPO) reportedly have already reached $519.5 billion, up 380% year over year. This means Google has accumulated a large number of contracts yet to be fulfilled, providing some order support for future revenue growth. Of course, orders are not the same as realized revenue; ultimately, it remains to be seen whether these contracts can be converted into revenue and profit as planned. If Google Cloud revenue continues to grow rapidly and margins improve further, confidence in Google’s ability to commercialize AI could strengthen.

II. AI Investment Is Growing, Putting Pressure on Free Cash FlowHowever, behind the strong growth are risks that cannot be ignored. The market expects Google’s capital expenditures in the third quarter to reach $55.8 billion, surging 132.7% year over year. These funds are primarily being used to build data centers, servers, and AI infrastructure. The more intense the AI competition becomes, the more Google needs to keep investing to maintain computing capacity and technological competitiveness. The problem is that capital expenditures do not translate into profit immediately. If investment grows faster than cash flow, the company’s free cash flow could come under pressure. Even if revenue continues to rise, the cash returns shareholders actually receive may not increase at the same pace. The market is also watching for changes in Google’s share buybacks. Whether buybacks have been paused, for how long, and whether they will resume should be confirmed using the company’s latest disclosures. For investors, what truly matters is not how much Google spends, but how much return those investments ultimately generate.

III. Valuation Is Not Extreme, but Expectations Have Risen
From a valuation perspective, relevant data show Google’s trailing P/E ratio at around 16.27 and its forward P/E at around 23.87. The two differ significantly, possibly because of differences between past earnings and future earnings expectations; this alone is not enough to conclude that Google is at its lowest historical valuation. If AI businesses continue to deliver growth, current valuation may be supported by performance; but if cloud growth slows or capital expenditures continue to exceed expectations, the market may reassess Google’s valuation. In addition, options markets’ expected volatility ahead of the earnings announcement is also worth watching. If implied volatility is high, it means the market is preparing for price movements after the earnings release, but this does not mean the stock will necessarily rise or fall.

IV. On October 28, Focus on Three Key Questions
In summary, there are three areas to watch in this earnings report:
First, can Google Cloud maintain rapid growth, and will its margins continue to improve?
Second, will AI capital expenditures expand further, and can free cash flow withstand continued investment?
Third, can the commercialization progress of AI products such as Gemini gradually translate into actual revenue and profit?
Google currently faces a clear central tension: on one side is its rapidly growing AI business, and on the other, its steadily rising infrastructure investment.
If growth and profitability materialize in tandem, Google’s AI investments could receive stronger support from its financial performance; conversely, even if revenue beats expectations, the market may reprice the stock because of cost and cash-flow pressures. #Gate广场万圣节