"Google Cloud, which grew 63% to $20.03 billion in Q1 with a $462 billion backlog. That backlog, along with Gemini's developer traction and Waymo's commercial ramp, expanded the multiple from a value-stock 18x to a growth-stock 29x."
"Cloud operating margin jumped from 17.8% to 32.9%, cloud operating income tripled YoY, and Sundar Pichai said on the call that 'our cloud revenue would have been higher if you were able to meet the demand.' Roughly 50% of the $462 billion backlog is expected to be recognized over the next 24 months."
"Free cash flow dropped 46.63% YoY to $10.12 billion because capex more than doubled to $35.67 billion. Management raised full-year 2026 capex to $180 billion to $190 billion and warned that '2027 CapEx [will] significantly increase compared to 2026.'"
Alphabet trades at $384.27 after a 30.5% monthly gain, with Q1 earnings nearly doubling consensus estimates. Google Cloud emerged as the primary growth driver, expanding 63% to $20.03 billion with a $462 billion backlog and improving operating margins from 17.8% to 32.9%. Q1 EPS of $5.11 vastly exceeded the $2.63 estimate, representing a 94.1% surprise. The company's valuation expanded from 18x to 29x as investors recognized growth potential from cloud revenue, Gemini's developer adoption, and Waymo's commercial expansion. However, capex doubled to $35.67 billion in Q1, with management projecting $180-190 billion annually through 2026 and warning of further increases in 2027. Wall Street consensus remains bullish with 61 buy ratings and price targets around $495-569.
Read at 24/7 Wall St.
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