Alphabet: Focus on "I" Creates a Buying Opportunity

Research evidence excerpt

Alphabet: Focus on "I" Creates a Buying Opportunity

23 July 2026

Internet

Alphabet

growth being generated by larger peers, reinforcing that Google is now competing

at scale rather than simply growing quickly from a smaller base.

Demand indicators were also broad and consistently strong. Backlog expanded by

more than $50bn q/q to $514bn, with slightly more than half expected to convert

within 24 months. Customer acquisition velocity more than doubled y/y, existing

customers exceeded commitments by more than 50%, and Cloud Marketplace

transactions increased more than seven-fold. Nearly 90% of the Fortune 100 now

use Gemini Enterprise, while 500 Cloud customers each processed more than 1tn

tokens over the past year, and more than 2,000 enterprises consumed over 100bn

tokens.

We contend that Cloud is now large enough that sustained outperformance can

materially change Alphabet’s consolidated revenue and earnings trajectory.

Every incremental $50bn of FY27 Cloud revenue, at a conservative 40% operating

margin (below current 55% y/y incremental OI margins), would add approximately

$20bn of operating income and roughly $1.33 of GAAP EPS. The current backlog,

customer consumption, and supply constraints suggest upside to Cloud revenue

may remain a catalyst for Google in the near to medium term .

There were no major deal-related announcements during the quarter, such as the

multibillion dollar commitments from Anthropic or Meta in prior quarters, yet the

backlog increased substantially and Google added almost $5bn in revenue q/q.

Along with that, usage KPIs are also growing at a fast clip, suggesting enterprise AI

adoption likely is moving from experimentation toward production deployment.

TPU System Sales Expand Alphabet’s Market Opportunity