Cloud is where the argument will be settled
Google Cloud revenue jumped 82% to $24.8 billion last quarter, and operating income climbed to $8.8 billion from $2.8 billion a year earlier. That is a margin of 35.6%, which is hard to argue with for a business growing at that pace. LSEG consensus is looking for revenue of about $29.6 billion this time, close to double the year-ago figure. The range of estimates is wide, from $25.0 billion to $36.7 billion across 26 contributing analysts, reflecting genuine uncertainty about the pace of Cloud acceleration.
Underneath that sits a backlog of $514 billion, up from about $460 billion a quarter earlier, with about half expected to turn into revenue over the next 24 months. Alphabet also began recognising revenue from TPU systems delivered into customers’ own data centres in the second quarter, although the CFO said most of that revenue will land in 2027. Margins are the thing to watch here. The Wiz acquisition creates some headwind for the rest of the year, and hardware sales generally carry lower margins than cloud services, though the CFO has said Alphabet does not break out margins for any specific products or infrastructure components.