Sales
PricedIn$128B$122B – $134B
$122B$125B$128B$131B$134B
adjusted EPS
PricedIn$2.94$2.51 – $3.35
$2.51$2.74$2.94$3.14$3.35
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The models agree revenues grow about a quarter on last year and margins stay near 34%; they split on Cloud. Muse Spark Open is lowest at $124B, with Cloud adding only “the modest ~$1B sequential assumed” and having “kept ad-growth assumptions conservative”. Sol is highest at $131B, forecasting “cloud sales of about $31 billion in the third quarter”. Muse Spark Open's range is widest at the bottom: its $115B low has Search and YouTube slowing “to low single digits”.
The models expect third-quarter revenues of about $128B, as fast Cloud growth outweighs a tougher Search comparison and a slight currency drag.
Sales$128B+25% on Q3 2025 ($102B)50% range$125B – $131B80% range$122B – $134B
Adjusted EPS$2.94+34% on Q3 2025 ($2.19: $2.87 reported, less $0.68 for gain (loss) on equity securities, net, in the Q3 2025 release)50% range$2.74 – $3.1480% range$2.51 – $3.35
Investment and cash generation
Base case
Capital spending$56.2B
Free cash flow−$5.83B
Free cash flow: operating cash flow less capital spending.
Alphabet's second quarter set a high bar. Revenues reached $119.8B, up 24% from a year earlier. Cloud revenues rose 82% to $24.8B, Cloud's backlog of signed contracts climbed to $514B, and Search and other advertising grew 17%.
The company flagged brakes on the third quarter. Search starts lapping last year's acceleration, currency turns from a help into a slight headwind, and the World Cup lift to YouTube fades. It is also renting outside computing capacity, which it says will squeeze margins for a while.
The quarter has ended, but its results were not out when the forecasts were made. The models' average of $128B is 25% above a year earlier and 6.6% above the second quarter. They put Cloud near $28.5B and Google Services near $98.8B, with an operating margin near 34%.
They differ mostly on Cloud. Sol puts it near $31B on strong customer wins, while Muse Spark Open allows only a small step up. The ranges run from $115B to $140B, but most models sit between $123B and $132B.
The models expect earnings per share of about $2.94, leaving out gains on equity securities, which added $6.26 to the second quarter's $9.11. A margin near 34% and more shares after June's stock sale keep it close to last year's $2.87.
Sales by quarter
Q1 2025$90B+12%
Q2 2025$96B+14%
Q3 2025$102B+16%
Q4 2025$114B+18%
Q1 2026$110B+22%
Q2 2026$120B+24%
Q3 2026$128B+25%
Each percent is on the same quarter a year earlier. The last row is the models' forecast.
The quarter forecast, line by line
Q2 2026 adjusted EPS $2.85: $9.11 reported, less $6.26 for gain (loss) on equity securities, net, in the Q2 2026 release.
Q3 2025 adjusted EPS $2.19: $2.87 reported, less $0.68 for gain (loss) on equity securities, net, in the Q3 2025 release.
Q4 2025 adjusted EPS $2.67: $2.82 reported, less $0.15 for gain (loss) on equity securities, net, in the Q4 2025 release.
The lines as the company's statement shows them. The forecast columns are the average of the models, line by line. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter worked out from the averaged lines with the company's adjustments.
What it rests on
- Second-quarter revenues
- $119.8B, up 24% from a year earlier
Consolidated revenues were $119.8 billion, up 24% with 23% in constant currency.
Second-quarter earnings call - Cloud growth
- Cloud revenues rose 82% to $24.8B in the second quarter
•Google Cloud saw a meaningful acceleration in growth as revenues increased 82% to $24.8 billion, led by an increase in Google Cloud Platform (GCP) across enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.
Second-quarter earnings release - Cloud backlog
- $514B at the end of June, up more than $50B in the quarter
Google Cloud's backlog increased by more than $50 billion sequentially, reaching $514 billion in the second quarter.
Second-quarter earnings call - Tougher Search comparison
- Search begins lapping last year's third-quarter acceleration
Q3, we will begin lapping an acceleration in Search performance that began in the third
Second-quarter earnings call - Currency
- A slight headwind in the third quarter, after a one-point tailwind in the second
at the current spot rates, we would expect a slight FX headwind to our consolidated revenue in Q3, compared to a one percentage point FX tailwind in Q2.
Second-quarter earnings call - Rented capacity
- Outside capacity added in the third quarter as a bridge to its own data centers
capacity in Q3 as a bridging strategy while we build out more internal capacity. This
Second-quarter earnings call
Low and high
Basethe middle forecast
Key assumptions
Cloud keeps climbing as backlog converts, to about $28.5B, with chip system sales mostly later. Backlog reached $514B, and the company expects just over half of it as revenue within 24 months.6 of 6
- Opus 5.5Cloud backlog turning into revenue
- GPT-6.1 SolCloud capacity expansion and 2027 chip-system delivery ramp
- GLM 5.3Google Cloud backlog of $514 billion converting to revenue, with just over half recognized over 24 months and TPU system sales ramping into 2027
- Kimi K3.1 ProCloud backlog conversion and accelerator-system ramp
- Muse Spark OpenCloud sustains strong growth with backlog conversion and TPU sales starting
- DeepSeek V4.1 FlashGoogle Cloud revenue growth off the $514 billion backlog, more than half converting within 24 months
Search growth eases to about 15% to 16%, from 17%, as it laps last year's acceleration. The company warned of the tougher comparison and a slight currency headwind in the third quarter.6 of 6
- Opus 5.5I slowed Search growth to about 16% in the third quarter (from 17%) because of the tougher comparison and a small currency headwind.
- DeepSeek V4.1 FlashI take Search growth from about 17% in the second quarter to 15% in the third
- GLM 5.3Search and YouTube advertising growing low-to-mid teens as AI features expand queries and monetization, decelerating as the 2025 acceleration is lapped
- Muse Spark OpenCFO said Q3 will see slight FX headwind vs Q2 tailwind and lapping of Search acceleration starting Q3 last year
- GPT-6.1 SolSearch comparisons, the fading World Cup boost and capacity constraints are valid cautions
- Kimi K3.1 ProMid-teens Google Services growth
The operating margin holds near 34%, as rented capacity and depreciation offset growth. The company said renting outside capacity will create modest margin pressure in the near term.6 of 6
- Opus 5.5hold the third-quarter operating margin at about 34%
- GLM 5.3the company guided to margin pressure in H2-2026 from third-party capacity bought as a bridge
- DeepSeek V4.1 FlashRented capacity costs more than capacity Alphabet owns, so it eats Cloud margin in the near term.
- Muse Spark OpenUse of third-party capacity as bridging strategy will create modest margin pressure in near-term
- Kimi K3.1 Pronear-term third-party capacity pressure
- GPT-6.1 Solwarns that rented capacity creates near-term margin pressure
Capital spending near $56.2B in the quarter keeps free cash flow negative, near −$5.8B. The company raised its 2026 capital spending range twice and expects free cash flow to stay under pressure.6 of 6
- Opus 5.5I take 2026 capital spending at $200 billion, the middle of the new guidance
- GPT-6.1 SolI use about $200 billion of capital spending this year
- GLM 5.3I use $200 billion, about $55 billion in Q3
- Kimi K3.1 Pro$200 billion of 2026 capital spending
- Muse Spark Opendrove base capex 200B and 260B
- DeepSeek V4.1 FlashI take $200 billion for the year, split about $57 billion in the third quarter
No further gains on equity securities count in earnings per share. The second quarter's $99.0B equity gain added $6.26 a share; such marks cannot be forecast.5 of 6
- Opus 5.5I assume no equity gains from here on
- Kimi K3.1 Proforecast no future gain or loss
- DeepSeek V4.1 FlashI assume no net gain or loss on equity securities in any future period
- GLM 5.3my adjusted EPS removes them
- GPT-6.1 SolTheir size does not improve adjusted earnings.
If all of this happens
$128Bsales
$2.94adjusted EPS
$56.2BCapital spending
−$5.83BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Search growth slows to 11% to 12%, against about 16% in the base. The quarter laps last year's Search acceleration, and oil near $115 a barrel weighs on advertisers.6 of 6
- Opus 5.5Search slows toward 11 to 12% against the tough comparison
- Muse Spark OpenSearch and YouTube growth slows to low single digits on macro and lapping
- DeepSeek V4.1 FlashSearch and other revenue growth falls to about 13%
- GLM 5.3Search decelerates to single digits
- Kimi K3.1 ProSlower Search and YouTube advertising growth
- GPT-6.1 SolWeaker advertiser spending and tougher search competition
Cloud stalls near $27B rather than $28.5B as capacity and chip deliveries slip. Management has said demand outruns supply and expected a tight demand-supply environment through 2026.6 of 6
- Opus 5.5Cloud capacity shortfall and slower backlog conversion
- GPT-6.1 SolDelayed capacity delivery and chip-system shipments
- GLM 5.3TPU shipments slip
- Kimi K3.1 ProDelayed Cloud capacity and accelerator-system deliveries
- Muse Spark OpenCloud expansion slows and third-party capacity creates margin pressure
- DeepSeek V4.1 FlashGoogle Cloud sequential growth stalling near $1.5-2 billion a quarter as TPU system deliveries slip into 2027
Depreciation and rented capacity push the operating margin below 34%. Depreciation rose 38% in 2025, and rented capacity costs more than owned data centers.6 of 6
- Opus 5.5depreciation and rented capacity costs
- GPT-6.1 SolHigh depreciation, energy and external-capacity costs
- GLM 5.3Operating margin compresses as depreciation, third-party capacity costs and supply-chain inflation outrun revenue leverage
- Kimi K3.1 ProHigher infrastructure and energy costs
- Muse Spark OpenDepreciation and AI talent costs rise faster than sales
- DeepSeek V4.1 FlashRented third-party capacity and a hardware-heavy mix cutting Cloud operating margin
A stronger dollar trims revenues earned abroad more than the slight headwind expected. About half of sales come from outside the United States.3 of 6
- Opus 5.5stronger dollar
- Kimi K3.1 ProForeign-exchange and regulatory pressure
- GLM 5.3it trims my reported revenue middle slightly
If all of this happens
$122Bsales · −5% vs base
$2.51EPS · −15% vs base
Revenues would have to land near $122B, about 4.7% under the base. Search would slow to 11% to 12% against the tough comparison, Cloud would stall near $27B as capacity stays short, and high oil prices, weak consumers and a stronger dollar would trim ad budgets. Rented capacity and depreciation would push the margin down, taking earnings per share toward $2.51, about 15% below the base. Muse Spark Open's low is furthest, at $115B, because it alone lets Search and YouTube growth fall to low single digits in a quarter that has already ended.
In the second quarter Search grew 17% and Cloud 82%, and the company is renting extra capacity precisely to keep serving demand.
The six lows run from $115B (Muse Spark Open) to $125B (GLM 5.3).
First signThe third-quarter report, the next one due: Cloud revenues below $27B or Search growth below 13%.
Highabout 1 chance in 10 of better
What the high case assumes
Cloud tops $30B as capacity frees backlog, against about $28.5B in the base. Customers typically spend more than 50% above their commitments, the Cloud chief said in September.6 of 6
- Opus 5.5Rented capacity and new data centers release pent-up demand, so Cloud tops $30 billion in the third quarter
- GPT-6.1 SolFaster conversion of cloud commitments and additional large contracts
- GLM 5.3TPU system shipments ramp faster than planned and new mega-deals pull revenue forward from 2027 into late 2026
- Kimi K3.1 ProFaster Cloud capacity and accelerator-system delivery
- Muse Spark OpenCloud backlog 514 billion converts faster with new customers doubling
- DeepSeek V4.1 FlashFaster conversion of the $514 billion Cloud backlog and earlier TPU system revenue
Search holds near 17% growth, against about 16% in the base, as AI Mode advertising scales. AI Mode passed one billion monthly users, and the company says it adds to Search queries overall.6 of 6
- GLM 5.3Search sustains 17%+ growth as AI Mode monetization expands ad coverage to previously unmonetizable queries
- DeepSeek V4.1 FlashSearch and other revenue holds near 17% growth as AI Mode and AI Max widen monetisable queries
- Opus 5.5AI Mode and agentic commerce advertising
- Muse Spark OpenSearch queries hit new highs on AI Mode with over one billion users driving upside
- Kimi K3.1 ProSustained strong Search and subscription growth
- GPT-6.1 SolImproved search advertising coverage and subscription pricing
The operating margin holds near 35% as Cloud's scale offsets rented capacity. Cloud's operating margin rose to 35.6% in the second quarter from 20.7% a year earlier.6 of 6
- Opus 5.5operating leverage in Cloud
- GLM 5.3Cloud operating margin keeps expanding beyond 35.6% as internal capacity replaces costly third-party bridging capacity
- Kimi K3.1 ProBetter-than-expected Cloud operating leverage
- Muse Spark OpenOperating leverage from AI efficiencies and pricing power
- DeepSeek V4.1 FlashOperating leverage outrunning depreciation and energy costs
- GPT-6.1 SolEfficient internal capacity replacing expensive rented capacity
If all of this happens
$134Bsales · +5% vs base
$3.35EPS · +14% vs base
Revenues would have to reach about $134B, 4.9% above the base. Rented capacity and new data centers would release pent-up Cloud demand, lifting Cloud past $30B, and Search would hold near 17% as AI Mode advertising scales. The margin would stay near 35%, lifting earnings per share toward $3.35, about 14% above the base. Sol's high is furthest, at $140B, because it lets capacity arrive sooner and enterprise demand convert quickly into both usage and chip system sales, on top of a middle that already has Cloud near $31B.
In September the Cloud chief described a run rate of nearly $100B a year, which matches about $25B a quarter.
The six highs run from $130B (GLM 5.3) to $140B (GPT-6.1 Sol).
First signThe third-quarter report, the next one due: Cloud growth above 95% or backlog well above $550B.
Watch
The third-quarter report is the test. Cloud near $28.5B with backlog still rising fits the base; below $27B points lower, above $30B higher. Search growth below 13% points lower, near 17% higher. Watch also the operating margin against 34% and what management says about rented capacity costs.
Sales
PricedIn$143B$134B – $151B
$134B$139B$143B$147B$151B
adjusted EPS
PricedIn$3.22$2.73 – $3.72
$2.73$2.98$3.22$3.45$3.72
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The models agree on growth near 25% from a year earlier but split on Cloud. Muse Spark Open is lowest at $138B; it keeps Cloud near “65 to 70 percent” growth and has “kept ad-growth assumptions conservative”. Sol and Kimi are highest at $147B: Sol puts Cloud near “$37 billion in the fourth”, and Kimi sees Services sustaining “mid-teens growth”. Sol's range is widest, from $132B with “Delayed capacity delivery and chip-system shipments” to $163B if “Capacity is delivered sooner”.
The models expect fourth-quarter revenues of about $143B, as Cloud's chip system sales begin to ramp at the end of the year.
Sales$143B+25% on Q4 2025 ($114B)50% range$139B – $147B80% range$134B – $151B
Adjusted EPS$3.22+21% on Q4 2025 ($2.67: $2.82 reported, less $0.15 for gain (loss) on equity securities, net, in the Q4 2025 release)50% range$2.98 – $3.4580% range$2.73 – $3.72
Investment and cash generation
Capital spending: not supplied by every model
Free cash flow: not supplied by every model
Free cash flow: operating cash flow less capital spending.
The fourth quarter is the one the company would discuss at its third-quarter report. Alphabet prints no revenue outlook, but it said it expects a relatively small portion of its chip system sales revenue this year, ramping as it exits 2026, with the vast majority in 2027.
A year earlier, fourth-quarter revenues were $114B and earnings per share $2.82. The models' average of $143B is 25% higher and about 12% above their third-quarter figure. They put Cloud near $33.7B and Google Services near $109B, with an operating margin near 33%.
Costs step up too. Depreciation keeps rising with $200B of capital spending this year, rented capacity costs more than owned data centers, and the Wiz purchase weighs on Cloud's margin for the rest of 2026.
The models' middles run from Muse Spark Open's $138B to $147B for Sol and Kimi, mostly on how much chip system revenue lands before the year ends. Their full ranges span $130B to $163B.
The models expect about $3.22 a share, 14% above a year earlier, leaving out equity gains. The margin slips toward 33% as depreciation and lower-margin chip hardware weigh, and more shares and preferred dividends trim what reaches each common share.
The quarter forecast, line by line
Q2 2026 adjusted EPS $2.85: $9.11 reported, less $6.26 for gain (loss) on equity securities, net, in the Q2 2026 release.
Q3 2025 adjusted EPS $2.19: $2.87 reported, less $0.68 for gain (loss) on equity securities, net, in the Q3 2025 release.
Q4 2025 adjusted EPS $2.67: $2.82 reported, less $0.15 for gain (loss) on equity securities, net, in the Q4 2025 release.
The lines as the company's statement shows them. The forecast columns are the average of the models, line by line. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter worked out from the averaged lines with the company's adjustments.
What it rests on
- Chip system timing
- A relatively small portion of chip system revenue this year, ramping as 2026 ends
We continue to expect to recognize a relatively small portion of the revenues from our existing TPU system sales agreements this year, ramping as we exit 2026.
Second-quarter earnings call - Most chip revenue later
- The vast majority of chip system revenue lands in 2027
We anticipate the vast majority of the revenues from these agreements will be realized in 2027.
Second-quarter earnings call - Wiz weighs on Cloud
- A low single-digit point drag on Cloud's margin for the rest of 2026
we expect a low single-digit percentage point headwind to cloud's operating margin for the remainder of 2026 related to the acquisition
First-quarter earnings call - Capital spending range
- Raised to $195B to $205B for 2026, from $180B to $190B
Moving to investments, we are updating our full year 2026 CapEx guidance range to
Second-quarter earnings call - Cloud backlog
- $514B at the end of June, up more than $50B in the quarter
Google Cloud's backlog increased by more than $50 billion sequentially, reaching $514 billion in the second quarter.
Second-quarter earnings call
Low and high
Basethe middle forecast
Key assumptions
Cloud steps up to about $33.7B as the first chip system sales ramp. The company expects a relatively small portion of chip system revenue this year, ramping as 2026 ends.6 of 6
- Opus 5.5I put Cloud at about $28.5 billion in the third quarter and $33 billion in the fourth
- GLM 5.3about $28.6 billion in Q3 and $34.4 billion in Q4 as TPU shipments ramp exiting the year
- GPT-6.1 Sol$37 billion in the fourth
- DeepSeek V4.1 FlashI allow only a modest step-up in Cloud in the fourth quarter
- Kimi K3.1 ProCloud backlog conversion and accelerator-system ramp
- Muse Spark OpenCloud sustains strong growth with backlog conversion and TPU sales starting
Google Services grows in the low-to-mid teens, to about $109B. Search faces a harder comparison all quarter, and the World Cup lift to YouTube is gone.6 of 6
- GLM 5.3keeping Google Services at about 13-14% growth
- DeepSeek V4.1 Flashhold it near 15% in the fourth
- Kimi K3.1 ProMid-teens Google Services growth
- Opus 5.5Search growing about 15% with AI features
- GPT-6.1 SolServices grow at low-teens rates
- Muse Spark OpenSearch and YouTube sustain double-digit growth on AI Overviews and AI Mode
The operating margin slips to about 33%, from 34% in the third quarter. Depreciation, rented capacity, the Wiz drag and lower-margin chip hardware all rise faster than revenue.6 of 6
- Opus 5.5Fourth-quarter costs usually step up with marketing and holiday device sales.
- GLM 5.3plus a low-single-digit headwind from the Wiz acquisition
- DeepSeek V4.1 FlashI raise cost of revenues from 38.4% of revenue in the second quarter to about 39.5% in the third and 39.9% in the fourth
- Kimi K3.1 ProHeavy infrastructure spending and rising depreciation
- GPT-6.1 SolEfficiency gains partly offsetting depreciation and research costs
- Muse Spark OpenCapex 195 to 205 billion in 2026 rising significantly in 2027 pressures depreciation
More shares and preferred dividends trim earnings per common share. June's sale of common and preferred stock raised $49.6B, and no buybacks were made in the first half.5 of 6
- Opus 5.5more shares after the June equity raise
- GLM 5.3with preferred dividends of about $290 million a quarter reducing income available to common stockholders
- Kimi K3.1 ProGradual diluted-share growth and preferred dividends
- DeepSeek V4.1 FlashI also let the diluted share count creep from 12,309 million in the second quarter to 12,400 million in the third and 12,450 million in the fourth
- GPT-6.1 SolCommon earnings deduct about $300 million of preferred dividends per forecast quarter.
If all of this happens
$143Bsales
$3.22adjusted EPS
Lowabout 1 chance in 10 of worse
What the low case assumes
Chip system deliveries slip into 2027, holding Cloud below the $33.7B base. Chip system revenue is booked on delivery and can vary from quarter to quarter.6 of 6
- GPT-6.1 SolDelayed capacity delivery and chip-system shipments
- DeepSeek V4.1 FlashTPU system deliveries slip into 2027
- GLM 5.3TPU shipments slip
- Kimi K3.1 ProDelayed Cloud capacity and accelerator-system deliveries
- Opus 5.5Cloud capacity shortfall and slower backlog conversion
- Muse Spark OpenCloud expansion slows and third-party capacity creates margin pressure
High energy prices and weak consumers cut advertising budgets. Oil neared $115 a barrel at the cutoff and consumer sentiment was 51.7, against 58.2 a year earlier.6 of 6
- GPT-6.1 Solan energy and financing shock weakens advertising
- DeepSeek V4.1 FlashAdvertising slowing as expensive energy squeezes consumers and a five per cent ten-year yield trims budgets
- GLM 5.3A consumer downturn (sentiment 51.7, mortgage 7.3%) cuts advertising budgets across Search, YouTube and Network
- Kimi K3.1 ProSlower Search and YouTube advertising growth
- Opus 5.5high oil prices and a stronger dollar trim advertising budgets
- Muse Spark OpenSearch and YouTube growth slows to low single digits on macro and lapping
Depreciation and rented capacity outgrow revenue, pushing the margin under 33%. Depreciation rose 38% in 2025, and spending this year is about double 2025's $91.4B.6 of 6
- Opus 5.5depreciation and rented capacity costs
- GPT-6.1 SolHigh depreciation, energy and external-capacity costs
- GLM 5.3Operating margin compresses as depreciation, third-party capacity costs and supply-chain inflation outrun revenue leverage
- Kimi K3.1 ProHigher infrastructure and energy costs
- Muse Spark OpenDepreciation and AI talent costs rise faster than sales
- DeepSeek V4.1 FlashDepreciation from about $200 billion of 2026 spending running ahead of revenue
If all of this happens
$134Bsales · −6% vs base
$2.73EPS · −15% vs base
Revenues would have to come in near $134B, about 5.7% below the base. Chip system deliveries would slip into 2027, Cloud's quarterly gains would shrink, and an energy and financing shock would cut advertising budgets. Depreciation and rented capacity would grow faster than sales, pulling earnings per share toward $2.73, about 15% under the base. Sol's low is furthest, at $132B, because its middle carries the most Cloud, near $37B, so a delay in capacity delivery and chip system shipments takes the most away.
Fourth-quarter revenues a year earlier were $114B, so even the lowest case still shows strong growth.
The six lows run from $130B (Muse Spark Open) to $140B (GLM 5.3).
First signAt the third-quarter report: management pushing chip system revenue later, or Cloud growth below 70%.
Highabout 1 chance in 10 of better
What the high case assumes
Chip systems ship sooner and new contracts convert fast, lifting Cloud above the $33.7B base. Customers typically spend more than 50% above their commitments, and new customer wins doubled.6 of 6
- Opus 5.5more capacity unlocking backlog
- GPT-6.1 SolFaster conversion of cloud commitments and additional large contracts
- GLM 5.3TPU system shipments ramp faster than planned and new mega-deals pull revenue forward from 2027 into late 2026
- Kimi K3.1 ProFaster Cloud capacity and accelerator-system delivery
- Muse Spark OpenCloud backlog 514 billion converts faster with new customers doubling
- DeepSeek V4.1 FlashFaster conversion of the $514 billion Cloud backlog and earlier TPU system revenue
Search holds near 17% growth as AI Mode advertising scales. AI Mode passed one billion monthly users, and the company says it adds to Search queries overall.6 of 6
- GLM 5.3Search sustains 17%+ growth as AI Mode monetization expands ad coverage to previously unmonetizable queries
- DeepSeek V4.1 FlashSearch monetisation of longer, previously unmonetisable AI queries
- Opus 5.5AI Mode and agentic commerce advertising
- Muse Spark OpenSearch queries hit new highs on AI Mode with over one billion users driving upside
- Kimi K3.1 ProSustained strong Search and subscription growth
- GPT-6.1 SolImproved search advertising coverage and subscription pricing
Margins hold near 34% as internal capacity replaces rented capacity. Cloud's operating margin rose to 35.6% in the second quarter from 20.7% a year earlier.6 of 6
- Opus 5.5operating leverage in Cloud
- GLM 5.3Cloud operating margin keeps expanding beyond 35.6% as internal capacity replaces costly third-party bridging capacity
- Kimi K3.1 ProBetter-than-expected Cloud operating leverage
- Muse Spark OpenOperating leverage from AI efficiencies and pricing power
- DeepSeek V4.1 FlashOperating leverage outrunning depreciation and energy costs
- GPT-6.1 SolEfficient internal capacity replacing expensive rented capacity
If all of this happens
$151Bsales · +6% vs base
$3.72EPS · +15% vs base
Revenues would have to reach about $151B, 6.1% above the base. Chip systems would ship faster than the company's small-portion guidance, new large contracts would add to backlog, and Search would hold near 17%. The margin would hold as internal capacity replaces rented capacity, lifting earnings per share toward $3.72, about 15% above the base. Sol's high is furthest, at $163B, because it lets capacity arrive sooner and demand convert rapidly into both usage and chip system sales, starting from a $37B Cloud middle.
Cloud backlog rose from $155B in September 2025 to $514B in June 2026.
The six highs run from $144B (DeepSeek V4.1 Flash) to $163B (GPT-6.1 Sol).
First signAt the third-quarter report: chip system revenue landing ahead of plan, or backlog additions above $50B.
Watch
The third-quarter report and its call: what management says about chip system deliveries, rented capacity costs and currency. More chip system revenue before the year ends points higher; delays, or Search growth falling below 13%, point lower.
Sales
PricedIn$500B$484B – $517B
$484B$492B$500B$508B$517B
adjusted EPS
PricedIn$11.76$10.75 – $12.80
$10.75$11.28$11.76$12.27$12.80
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The models agree on growth of 22% to 26% and a margin of 34% to 35%. Muse Spark Open is lowest at $491B, with Cloud adding “the modest ~$1B sequential assumed” and having “kept ad-growth assumptions conservative”. Sol is highest at $508B, with “cloud sales of about $31 billion in the third quarter and $37 billion in the fourth”. Kimi's range is widest, from $480B if “Cloud capacity and accelerator deliveries slip” to $536B if “New capacity arrives faster than expected”.
The models expect 2026 revenues of about $500B, with Cloud's surge adding to steady advertising growth.
Sales$500B+24% on FY202550% range$492B – $508B80% range$484B – $517B
Adjusted EPS$11.76$5.61 reported so far (Q1 2026 $2.76: $5.11 reported, less $2.35 for gain (loss) on equity securities, net, in the Q1 2026 release; Q2 2026 $2.85: $9.11 reported, less $6.26 for gain (loss) on equity securities, net, in the Q2 2026 release)50% range$11.28 – $12.2780% range$10.75 – $12.80
Base caseOperating margin34.4%32.0% in FY2025
Investment and cash generation
Base case
Capital spending$200B
Free cash flow−$8.80B
Free cash flow: operating cash flow less capital spending.
Alphabet booked $230B of revenues in the first half of 2026, after $403B in all of 2025. Growth quickened from 22% in the first quarter to 24% in the second, led by Cloud and Search.
The models put the full year near $500B, up 24%. They expect a bigger second half as Cloud's backlog converts and the first chip system sales arrive, while Search slows against last year's acceleration.
Spending is the other story. The company raised its 2026 capital spending range twice, to $195B to $205B, and all six models take $200B. Free cash flow, $73.3B in 2025, turns negative in their average, near −$8.8B, and the company raised money through debt and a June stock sale.
Reported earnings per share swing with gains on equity securities, which added $6.26 a share in the second quarter alone. The forecasts leave those gains out, so their full-year figure of about $11.76 sits well below the $14.22 already reported for the first half.
Leaving out equity gains, the models expect about $11.76 a share: roughly $2.76 and $2.85 in the first two quarters, then about $2.94 and $3.22. An operating margin near 34% carries it; more shares after June's stock sale hold it back.
Sales by quarter
Q1 2025$90B+12%
Q2 2025$96B+14%
Q3 2025$102B+16%
Q4 2025$114B+18%
Q1 2026$110B+22%
Q2 2026$120B+24%
Q3 2026$128B+25%
Q4 2026$143B+25%
Each percent is on the same quarter a year earlier. The forecast rows are the models' average.
What it rests on
- Capital spending range
- Raised to $195B to $205B for 2026, from $180B to $190B
Moving to investments, we are updating our full year 2026 CapEx guidance range to
Second-quarter earnings call - Equity gain excluded
- A $99.0B gain added $6.26 to second-quarter earnings per share
For Q2 2026, the net effect of the gain on equity securities of $99.0 billion increased the provision for income tax, net income, and diluted net income per common share by $21.9 billion, $77.1 billion, and $6.26, respectively.
Second-quarter earnings release - Free cash flow
- −$5.9B in the second quarter, driven by capital spending
We had negative free cash flow of $5.9 billion in the second quarter, driven by our investments in CapEx.
Second-quarter earnings call - Backlog conversion
- Just over half of backlog expected as revenue within 24 months
for our broad mix of customers, and we expect to recognize just over 50% of the total
Second-quarter earnings call - Cloud growth
- Cloud revenues rose 82% to $24.8B in the second quarter
•Google Cloud saw a meaningful acceleration in growth as revenues increased 82% to $24.8 billion, led by an increase in Google Cloud Platform (GCP) across enterprise AI Solutions and enterprise AI Infrastructure, as well as core GCP services.
Second-quarter earnings release - No buybacks
- No share repurchases in the first half of 2026
In the three and six months ended June 30, 2026, there were no repurchases of the company's Class A or Class C shares.
Second-quarter quarterly report
Low and high
Basethe middle forecast
Key assumptions
Cloud carries the growth as backlog converts, with chip system sales still small this year. Backlog reached $514B; management expects only a small portion of chip system revenue in 2026.6 of 6
- Opus 5.5Cloud backlog turning into revenue
- GPT-6.1 SolCloud capacity expansion and 2027 chip-system delivery ramp
- GLM 5.3Google Cloud backlog of $514 billion converting to revenue, with just over half recognized over 24 months and TPU system sales ramping into 2027
- Kimi K3.1 ProCloud backlog conversion and accelerator-system ramp
- Muse Spark OpenCloud sustains strong growth with backlog conversion and TPU sales starting
- DeepSeek V4.1 FlashTiming of TPU system sales, small in 2026 and mostly in 2027
Advertising keeps growing in the low-to-mid teens as AI features lift Search. Search grew 17% in the second quarter, though it now laps last year's acceleration.6 of 6
- Opus 5.5Search growing about 15% with AI features
- GPT-6.1 SolHealthy search advertising and paid subscription growth
- GLM 5.3Search and YouTube advertising growing low-to-mid teens as AI features expand queries and monetization, decelerating as the 2025 acceleration is lapped
- Kimi K3.1 ProMid-teens Google Services growth
- Muse Spark OpenSearch and YouTube sustain double-digit growth on AI Overviews and AI Mode
- DeepSeek V4.1 FlashSearch and other revenue holding mid-teens growth as it laps the 2025 acceleration, with a slight third-quarter currency headwind
The operating margin holds near 34% for the year, above 2025's 32%. First-half margins were 36% and 34%; depreciation and rented capacity weigh on the second half.6 of 6
- Opus 5.5The operating margin holds near 34%
- GLM 5.3Operating margin holds around 33-34% in 2026
- DeepSeek V4.1 FlashOperating margin holds near 34-35% because advertising leverage and cost discipline absorb a step-up in depreciation
- GPT-6.1 SolConsolidated margins stay around 35%
- Muse Spark Openmargins 34 to 35 percent supported by Cloud margin expansion
- Kimi K3.1 Proscale largely offsets depreciation and near-term capacity costs
Capital spending of $200B leaves free cash flow near −$8.8B on average. The company sets its range at $195B to $205B and expects free cash flow to stay under pressure.6 of 6
- Opus 5.5I take 2026 capital spending at $200 billion, the middle of the new guidance
- GPT-6.1 SolI use about $200 billion of capital spending this year
- GLM 5.3I use $200 billion
- Kimi K3.1 Pro$200 billion of 2026 capital spending
- Muse Spark Opendrove base capex 200B and 260B
- DeepSeek V4.1 FlashI take $200 billion for the year
Equity gains are left out, and more shares follow June's stock sale. First-half equity gains added $2.35 and $6.26 a share; no buybacks were made in the first half.5 of 6
- Opus 5.5I assume no equity gains from here on
- Kimi K3.1 Proforecast no future gain or loss
- DeepSeek V4.1 FlashI assume no net gain or loss on equity securities in any future period
- GLM 5.3my adjusted EPS removes them
- GPT-6.1 SolTheir size does not improve adjusted earnings.
If all of this happens
$500Bsales
$11.76adjusted EPS
$200BCapital spending
−$8.80BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Advertising slows in the second half as energy prices and weak consumers cut budgets. Oil neared $115 a barrel at the cutoff and consumer sentiment was 51.7, against 58.2 a year earlier.6 of 6
- Opus 5.5high oil prices and a stronger dollar trim advertising budgets
- GPT-6.1 SolWeaker advertiser spending and tougher search competition
- GLM 5.3A consumer downturn (sentiment 51.7, mortgage 7.3%) cuts advertising budgets across Search, YouTube and Network
- Kimi K3.1 ProSlower Search and YouTube advertising growth
- Muse Spark OpenSearch and YouTube growth slows to low single digits on macro and lapping
- DeepSeek V4.1 FlashAdvertising slowing as expensive energy squeezes consumers and a five per cent ten-year yield trims budgets
Cloud capacity and chip deliveries slip, holding second-half Cloud below the base. Management says demand outruns supply, and its own risk factors cite limits on power, water and land.6 of 6
- Opus 5.5Cloud capacity shortfall and slower backlog conversion
- GPT-6.1 SolDelayed capacity delivery and chip-system shipments
- GLM 5.3TPU shipments slip
- Kimi K3.1 ProDelayed Cloud capacity and accelerator-system deliveries
- Muse Spark OpenCloud expansion slows and third-party capacity creates margin pressure
- DeepSeek V4.1 FlashGoogle Cloud sequential growth stalling near $1.5-2 billion a quarter as TPU system deliveries slip into 2027
Depreciation and rented capacity pull the margin toward 30%, against 34% in the base. Capital spending of $200B this year is more than double 2025's $91.4B.6 of 6
- Opus 5.5Depreciation and rented capacity push the operating margin toward 30%
- GPT-6.1 SolHigh depreciation, energy and external-capacity costs
- GLM 5.3Operating margin compresses as depreciation, third-party capacity costs and supply-chain inflation outrun revenue leverage
- Kimi K3.1 ProHigher infrastructure and energy costs
- Muse Spark OpenDepreciation and AI talent costs rise faster than sales
- DeepSeek V4.1 FlashDepreciation from about $200 billion of 2026 spending running ahead of revenue
Legal remedies or new charges add pressure. A December 2025 judgment requires sharing search data with competitors; both sides are appealing.3 of 6
- GPT-6.1 SolAdverse legal remedies or additional charges
- GLM 5.3DOJ search remedies
- Kimi K3.1 ProForeign-exchange and regulatory pressure
If all of this happens
$484Bsales · −3% vs base
$10.75EPS · −9% vs base
Revenues would have to finish near $484B, about 3.1% under the base, with earnings per share near $10.75, about 8.6% lower. Cloud capacity and chip deliveries would slip, Search would slow against the tough comparison, and high oil prices and a stronger dollar would trim ad budgets in the second half. Depreciation and rented capacity would pull the margin toward 30%. Muse Spark Open's low is furthest, at $470B, because it lets Search and YouTube growth slow to low single digits, the deepest advertising slowdown any model allows.
Half the year is already booked at $230B, so the range is far narrower than for later years.
The six lows run from $470B (Muse Spark Open) to $493B (GLM 5.3).
First signThe third-quarter report, the next one due: Search growth below 13% or Cloud revenues below $27B.
Highabout 1 chance in 10 of better
What the high case assumes
Capacity arrives sooner and chip systems ship faster, lifting second-half Cloud above the base. Customers typically spend more than 50% above their commitments, the Cloud chief said in September.6 of 6
- Kimi K3.1 ProFaster Cloud capacity and accelerator-system delivery
- Opus 5.5more capacity unlocking backlog
- GPT-6.1 SolFaster conversion of cloud commitments and additional large contracts
- GLM 5.3TPU system shipments ramp faster than planned and new mega-deals pull revenue forward from 2027 into late 2026
- Muse Spark OpenCloud backlog 514 billion converts faster with new customers doubling
- DeepSeek V4.1 FlashFaster conversion of the $514 billion Cloud backlog and earlier TPU system revenue
Search holds near 17% growth as AI Mode advertising scales. AI Mode passed one billion monthly users, and the company says it adds to Search queries overall.6 of 6
- Kimi K3.1 ProSustained strong Search and subscription growth
- GLM 5.3Search sustains 17%+ growth as AI Mode monetization expands ad coverage to previously unmonetizable queries
- DeepSeek V4.1 FlashSearch monetisation of longer, previously unmonetisable AI queries
- Opus 5.5AI Mode and agentic commerce advertising
- Muse Spark OpenSearch queries hit new highs on AI Mode with over one billion users driving upside
- GPT-6.1 SolImproved search advertising coverage and subscription pricing
Scale offsets infrastructure costs sooner, holding the margin near 35%. Cloud's operating margin rose to 35.6% in the second quarter from 20.7% a year earlier.6 of 6
- Kimi K3.1 ProBetter-than-expected Cloud operating leverage
- Opus 5.5operating leverage in Cloud
- GLM 5.3Cloud operating margin keeps expanding beyond 35.6% as internal capacity replaces costly third-party bridging capacity
- Muse Spark OpenOperating leverage from AI efficiencies and pricing power
- DeepSeek V4.1 FlashOperating leverage outrunning depreciation and energy costs
- GPT-6.1 SolEfficient internal capacity replacing expensive rented capacity
If all of this happens
$517Bsales · +3% vs base
$12.80EPS · +9% vs base
Revenues would have to reach about $517B, 3.5% above the base, with earnings per share near $12.80, about 8.8% higher. Capacity would arrive sooner, letting Cloud ship chip systems and convert backlog faster, while Search held near 17% on AI Mode. Kimi's high is furthest, at $536B, because it combines faster capacity and chip shipments with Search monetization that “remains strong” on a mid-teens Services base, and scale efficiencies that “offset infrastructure costs sooner”.
First-half growth quickened each quarter, and Cloud grew 82% in the second quarter.
The six highs run from $506B (DeepSeek V4.1 Flash) to $536B (Kimi K3.1 Pro).
First signThe third-quarter report, the next one due: Cloud revenues above $30B, or Search growing faster than 17%.
Watch
Two reports remain, for the third and fourth quarters. Cloud revenue and backlog, Search growth against last year's acceleration, and the cost of rented capacity decide where 2026 lands. A higher capital spending range or more stock sales would weigh on free cash flow and earnings per share.
Sales
PricedIn$608B$543B – $680B
$543B$574B$608B$641B$680B
adjusted EPS
PricedIn$13.53$10.93 – $16.44
$10.93$12.20$13.53$14.91$16.44
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The models agree 2027 grows about 19% to 24% and margins dip near 33%. Muse Spark Open is lowest at $590B; it “kept ad-growth assumptions conservative”. Kimi is highest at $631B, expecting Services to sustain “mid-teens growth”. For earnings per share, GLM is lowest at $12.80, its margin dipping “to about 32.5% in 2027 under the depreciation ramp”; Muse Spark Open is highest at $14.20. Sol's range is widest, $535B to $735B: an “energy and financing shock” at one end, capacity “delivered sooner” at the other.
The models expect 2027 revenues of about $608B, as most chip system sales and much of Cloud's backlog turn into revenue.
Sales$608B+22% on FY202650% range$574B – $641B80% range$543B – $680B
Adjusted EPS$13.53+15% on FY202650% range$12.20 – $14.9180% range$10.93 – $16.44
Base caseOperating margin33.4%34.4% in FY2026
Investment and cash generation
Base case
Capital spending$266B
Free cash flow−$28.3B
Free cash flow: operating cash flow less capital spending.
2027 is when the company says most of its chip system revenue arrives. Cloud's backlog stood at $514B in June, and management expects just over half of it to become revenue within 24 months, before any new contracts or usage above commitments.
The models' average is $608B, up 22% on their 2026 figure. Their Cloud forecasts run from about $154B to $180B for the year, and they expect Google Services to keep growing in the low-to-mid teens.
Costs climb with the build. The company says 2027 capital spending will rise significantly; the models put it near $266B on average, from $255B to $290B. Depreciation follows, so the operating margin eases to about 33%, and free cash flow stays negative, near −$28.3B.
Earnings per share average about $13.53. The range is wide, from $10.93 to $16.44, because a delay or speed-up in chip deliveries and capacity could move 2027 sales by $40B or more, in Opus's estimate.
The models expect about $13.53 a share. Revenues grow 22% but earnings per share only 15%, because depreciation lowers the margin toward 33%, interest costs rise with new debt, and the share count keeps creeping up after the June stock sale.
Sales by year
FY2023$307B
FY2024$350B+14%
FY2025$403B+15%
FY2026$500B+24%
FY2027$608B+22%
FY2028$713B+17%
The forecast years are the models' average.
Google Cloud backlog at each quarter's end
September 2025$155B
December 2025$240B
March 2026$460B
June 2026$514B
Where each number comes from
- September 2025
Google Cloud's backlog increased 46% sequentially and 82% year-over-year, reaching $155 billion at the end of the third quarter.
- December 2025
Backlog grew by 55% quarter over quarter to $240 billion representing a wide breadth of customers driven by demand for AI products.
- March 2026
Cloud accelerated again this quarter due to strong demand for our AI products and infrastructure. Revenue grew 63%, exceeding $20 billion for the first time and our backlog nearly doubled quarter-on-quarter to over $460 billion.
- June 2026
Google Cloud's backlog increased by more than $50 billion sequentially, reaching $514 billion in the second quarter.
Signed Cloud contracts not yet booked as revenue. The models' 2027 and 2028 Cloud forecasts rest on how fast this converts.
What it rests on
- Most chip revenue in 2027
- The vast majority of chip system revenue is expected in 2027
We anticipate the vast majority of the revenues from these agreements will be realized in 2027.
Second-quarter earnings call - 2027 capital spending
- Expected to increase significantly from 2026, details later
we continue to expect our CapEx to increase significantly in 2027, and we'll provide more details at a later date.
Second-quarter earnings call - Backlog conversion
- Just over half of backlog expected as revenue within 24 months
for our broad mix of customers, and we expect to recognize just over 50% of the total
Second-quarter earnings call - Spending above commitments
- Customers typically spend more than 50% above what they commit
when a customer gives us a commitment, say, for $100, typically they spend more than 50% more than that.
Cloud chief, September conference - Depreciation climbing
- $21.1B in 2025, up 38% from $15.3B in 2024
depreciation increased by nearly billion dollars or 38% from $15.3 billion in 2024 to $21.1 billion in 2025
Fourth-quarter 2025 earnings call - Server payback
- Under two years for AI servers in aggregate
Second, our payback period on AI servers in aggregate is less than two years, and on
Cloud chief, September conference
Low and high
Basethe middle forecast
Key assumptions
Cloud reaches about $154B to $180B as backlog converts and chip system sales mostly land. Management expects most chip system revenue in 2027 and just over half of backlog within 24 months.6 of 6
- Opus 5.5chip system sales mostly land in 2027
- GLM 5.3TPU system sales ramping into 2027
- GPT-6.1 SolCloud capacity expansion and 2027 chip-system delivery ramp
- Kimi K3.1 ProCloud backlog conversion and accelerator-system ramp
- DeepSeek V4.1 FlashTiming of TPU system sales, small in 2026 and mostly in 2027
- Muse Spark OpenCloud backlog 514B with >50% to be recognized over 24 months and TPU system sales ramping in 2027
Google Services grows in the low-to-mid teens. AI features expand Search queries while subscriptions grow faster than advertising.6 of 6
- DeepSeek V4.1 FlashGoogle Services grows about 13% in 2026 and 12% in 2027
- GPT-6.1 SolServices grow at low-teens rates
- Kimi K3.1 ProMid-teens Google Services growth
- GLM 5.3Search and YouTube advertising growing low-to-mid teens
- Opus 5.5Search growing about 15% with AI features
- Muse Spark OpenSearch and YouTube sustain double-digit growth on AI Overviews and AI Mode
Capital spending rises to about $266B, keeping free cash flow negative. The company said 2027 spending will increase significantly from 2026's $200B.6 of 6
- Opus 5.5$290 billion in 2027
- GPT-6.1 SolI forecast capital spending of about $275 billion in 2027
- GLM 5.3I assume about $260 billion
- Kimi K3.1 Proa significant 2027 spending increase
- Muse Spark Opendrove base capex 200B and 260B
- DeepSeek V4.1 Flashso about $258 billion in 2027
Depreciation eases the operating margin to about 33%, from 34% in 2026. Depreciation follows spending with a lag, and it rose 38% in 2025.5 of 6
- GLM 5.3dips to about 32.5% in 2027 under the depreciation ramp
- Opus 5.5I let margins slip to 33% in 2027
- DeepSeek V4.1 Flashmy operating margin slips from 34.8% in 2026 to 34.0% in 2027
- GPT-6.1 Sol34.5% next year
- Kimi K3.1 Proto taper Cloud growth through 2028 and to temper consolidated margins
The share count keeps rising, with no buybacks. June's stock sale raised $49.6B, and an at-the-market program can sell more shares.4 of 6
- GLM 5.3roughly 12.7-13.0 billion across 2027-2028
- GPT-6.1 Sol12.8 billion in 2027
- Opus 5.5about 12.47 billion by 2028
- Kimi K3.1 Prosupport a modestly rising diluted share count
If all of this happens
$608Bsales
$13.53adjusted EPS
$266BCapital spending
−$28.3BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Cloud growth falls toward 35% to 45%, against about 60% in the base, as chip shipments slip. Chip system revenue is booked on delivery, and deliveries depend on power, land and supply.6 of 6
- GLM 5.3Cloud growth falls back toward 35-45% as TPU shipments slip and enterprise AI spending pauses to digest
- GPT-6.1 SolDelayed capacity delivery and chip-system shipments
- Opus 5.5Cloud capacity shortfall and slower backlog conversion
- Kimi K3.1 ProDelayed Cloud capacity and accelerator-system deliveries
- Muse Spark OpenCloud expansion slows and third-party capacity creates margin pressure
- DeepSeek V4.1 FlashGoogle Cloud sequential growth stalling near $1.5-2 billion a quarter as TPU system deliveries slip into 2027
A consumer downturn cuts advertising budgets across Search and YouTube. More than 70% of 2025 revenues came from advertising, and oil neared $115 a barrel at the cutoff.6 of 6
- GLM 5.3A consumer downturn (sentiment 51.7, mortgage 7.3%) cuts advertising budgets across Search, YouTube and Network
- DeepSeek V4.1 FlashAdvertising slowing as expensive energy squeezes consumers and a five per cent ten-year yield trims budgets
- GPT-6.1 Solan energy and financing shock weakens advertising
- Opus 5.5high oil prices and a stronger dollar trim advertising budgets
- Kimi K3.1 ProSlower Search and YouTube advertising growth
- Muse Spark OpenSearch and YouTube growth slows to low single digits on macro and lapping
Depreciation and rented capacity outrun revenue, pushing the margin below 33%. Spending of $200B in 2026 lands on the income statement in 2027 whether or not revenue does.6 of 6
- DeepSeek V4.1 FlashDepreciation from about $200 billion of 2026 spending running ahead of revenue
- Opus 5.5depreciation and rented capacity costs
- GPT-6.1 SolHigh depreciation, energy and external-capacity costs
- GLM 5.3Operating margin compresses as depreciation, third-party capacity costs and supply-chain inflation outrun revenue leverage
- Kimi K3.1 ProHigher infrastructure and energy costs
- Muse Spark OpenDepreciation and AI talent costs rise faster than sales
Search remedies and other legal charges begin to bite. A December 2025 judgment requires sharing search data and syndication with competitors; both sides are appealing.3 of 6
- GPT-6.1 SolAdverse legal remedies or additional charges
- GLM 5.3DOJ search remedies
- Kimi K3.1 ProForeign-exchange and regulatory pressure
If all of this happens
$543Bsales · −11% vs base
$10.93EPS · −19% vs base
Revenues would have to come in near $543B, about 11% under the base, with earnings per share near $10.93, about 19% lower. Chip system deliveries would slip, enterprises would pause AI spending, and a consumer downturn would cut ad budgets while depreciation and rented capacity outran revenue. Muse Spark Open's low is furthest, at $520B, starting from the lowest 2026 base and the most conservative advertising view. Sol's earnings low of $10.00 is the deepest, as it lets an energy and financing shock, legal restrictions and costs that do not fall with sales hit together.
Free cash flow fell from $73.3B in 2025 to −$5.9B in the second quarter of 2026, as quarterly capital spending reached $44.9B.
The six lows run from $520B (Muse Spark Open) to $562B (GLM 5.3).
First signThe fourth-quarter report: a 2027 capital spending range far above $270B, or chip system deliveries pushed later.
Highabout 1 chance in 10 of better
What the high case assumes
Capacity arrives sooner and new large contracts convert fast, lifting Cloud above the base. New customer wins and deals over $100M doubled from a year earlier, the Cloud chief said.6 of 6
- GPT-6.1 SolFaster conversion of cloud commitments and additional large contracts
- Opus 5.5more capacity unlocking backlog
- GLM 5.3TPU system shipments ramp faster than planned and new mega-deals pull revenue forward from 2027 into late 2026
- Kimi K3.1 ProFaster Cloud capacity and accelerator-system delivery
- Muse Spark OpenCloud backlog 514 billion converts faster with new customers doubling
- DeepSeek V4.1 FlashFaster conversion of the $514 billion Cloud backlog and earlier TPU system revenue
Search sustains about 17% growth as AI Mode advertising scales. AI Mode passed one billion monthly users, and the company says it adds to queries overall.6 of 6
- GLM 5.3Search sustains 17%+ growth as AI Mode monetization expands ad coverage to previously unmonetizable queries
- DeepSeek V4.1 FlashSearch monetisation of longer, previously unmonetisable AI queries
- Opus 5.5AI Mode and agentic commerce advertising
- Muse Spark OpenSearch queries hit new highs on AI Mode with over one billion users driving upside
- Kimi K3.1 ProSustained strong Search and subscription growth
- GPT-6.1 SolImproved search advertising coverage and subscription pricing
Internal capacity replaces rented capacity, holding the margin near 34% to 35%. Cloud's operating margin rose to 35.6% in the second quarter from 20.7% a year earlier.6 of 6
- GPT-6.1 SolEfficient internal capacity replacing expensive rented capacity
- GLM 5.3Cloud operating margin keeps expanding beyond 35.6% as internal capacity replaces costly third-party bridging capacity
- Opus 5.5operating leverage in Cloud
- Kimi K3.1 ProBetter-than-expected Cloud operating leverage
- Muse Spark OpenOperating leverage from AI efficiencies and pricing power
- DeepSeek V4.1 FlashOperating leverage outrunning depreciation and energy costs
Free cash flow recovers sooner, with 2027 spending guided below $240B. Chip hardware placed in customers' data centers brings strong cash flow, the Cloud chief said.2 of 6
- DeepSeek V4.1 FlashCapital spending guided below $240 billion for 2027, easing free cash flow
- Kimi K3.1 ProEarlier free-cash-flow recovery
If all of this happens
$680Bsales · +12% vs base
$16.44EPS · +21% vs base
Revenues would have to reach about $680B, 12% above the base, with earnings per share near $16.44, about 21% higher. New contracts would add to the June backlog, rented and new capacity would free pent-up demand, chip systems would ship faster, and Search would hold near 17% as AI Mode advertising scales. Sol's high is furthest, at $735B, because it lets demand convert rapidly into both usage and chip system sales on a Cloud middle already near $180B, the largest of any model.
Customers typically spend more than 50% above their commitments, and backlog grew more than $50B in the second quarter alone.
The six highs run from $634B (DeepSeek V4.1 Flash) to $735B (GPT-6.1 Sol).
First signThe fourth-quarter report: Cloud growth above 90% with backlog additions above $50B, and a 2027 spending range below $240B.
Watch
The 2027 capital spending range at the fourth-quarter report, quarterly Cloud revenue and backlog, and the pace of chip system deliveries. A range far above $270B or slipping deliveries point lower; backlog well above $550B and Search near 17% point higher.
Sales
PricedIn$713B$602B – $835B
$602B$655B$713B$771B$835B
adjusted EPS
PricedIn$15.84$11.87 – $20.27
$11.87$13.79$15.84$17.92$20.27
Middlethe forecast50% range1 in 4 chance the result comes in below this bar, 1 in 4 above it. Half the time it lands inside.80% range1 in 10 chance below this line, 1 in 10 above it. These are the low and high printed by each number.
The models agree growth slows to about 15% to 20%, with margins of 32% to 35%. Muse Spark Open is lowest at $680B, having “kept ad-growth assumptions conservative”. Kimi is highest at $759B, holding Services to “mid-teens growth” while Cloud “then normalizes”. For earnings per share GLM is lowest at $14.60 and Sol highest at $16.79. Sol's range is far wider, $570B to $970B: delayed capacity and an “energy and financing shock” at the bottom, operating leverage “lifting earnings substantially” at the top.
The models expect 2028 revenues of about $713B, as Cloud growth cools from its 2027 peak and spending growth eases.
Sales$713B+17% on FY202750% range$655B – $771B80% range$602B – $835B
Adjusted EPS$15.84+17% on FY202750% range$13.79 – $17.9280% range$11.87 – $20.27
Base caseOperating margin33.8%33.4% in FY2027
Investment and cash generation
Base case
Capital spending$300B
Free cash flow−$5.83B
Free cash flow: operating cash flow less capital spending.
By 2028 the question shifts from whether demand exists to whether the build-out pays. The models expect Cloud's growth to cool after the 2027 chip system surge, with Cloud between about $205B and $253B for the year.
The average is $713B, up 17% on their 2027 figure, with an operating margin near 34%. Capital spending keeps rising, to about $300B on average, so free cash flow averages near −$5.8B, though three models see it turning positive.
The company has given no figures this far out. It said only that 2027 spending will rise significantly, and its Cloud chief said AI servers pay back in under two years, which the models read as support for margins holding.
The spread is widest here. Earnings per share average $15.84 but range from $11.87 to $20.27, because delays or speed in capacity, chip shipments and advertising compound over three years.
The models expect about $15.84 a share, up 17%. Revenue growth and a steady margin near 34% do the work, while depreciation from earlier spending, interest costs and a share count near 13 billion hold it back.
Each model's growth in FY2028
Opus 5.5+16%
GPT-6.1 Sol+20%
GLM 5.3+15%
Kimi K3.1 Pro+20%
Muse Spark Open+15%
DeepSeek V4.1 Flash+17%
Growth of each model's middle on its own forecast for the year before.
What it rests on
- Server payback
- Under two years for AI servers in aggregate
Second, our payback period on AI servers in aggregate is less than two years, and on
Cloud chief, September conference - 2027 capital spending
- Expected to increase significantly from 2026, details later
we continue to expect our CapEx to increase significantly in 2027, and we'll provide more details at a later date.
Second-quarter earnings call - Spending above commitments
- Customers typically spend more than 50% above what they commit
when a customer gives us a commitment, say, for $100, typically they spend more than 50% more than that.
Cloud chief, September conference - Search remedies
- A December 2025 judgment restricts distribution and requires sharing search data with competitors
In August 2024, the US District Court for the District of Columbia ruled against Google, and in December 2025, entered a final judgment requiring remedies, which, among other things, imposes restrictions on how we distribute our services and requires us to share certain search data with and offer syndication services to certain competitors.
2025 annual report - Supply limits
- Scaling is increasingly limited by power, water and land
Our ability to scale our technical infrastructure is increasingly constrained by the availability of power, water, and land.
2025 annual report risk factors - Advertising share
- More than 70% of 2025 revenues came from online advertising
We generated more than 70% of total revenues from online advertising in 2025.
2025 annual report risk factors
Low and high
Basethe middle forecast
Key assumptions
Google Services keeps growing in the low-to-mid teens. Subscriptions grow faster than advertising, and AI features keep expanding Search queries.6 of 6
- DeepSeek V4.1 FlashGoogle Services grows about 13% in 2026 and 12% in 2027
- GPT-6.1 SolServices grow at low-teens rates
- Kimi K3.1 ProMid-teens Google Services growth
- GLM 5.3Search and YouTube advertising growing low-to-mid teens
- Opus 5.5Search growing about 15% with AI features
- Muse Spark OpenSearch and YouTube sustain double-digit growth on AI Overviews and AI Mode
Capital spending climbs to about $300B, so free cash flow hovers near zero. Spending growth slows after 2027's jump, and chip hardware sales bring cash on delivery.4 of 6
- GLM 5.3turning slightly positive in 2028 as TPU hardware sales bring cash on delivery
- GPT-6.1 Sol$315 billion in 2028
- DeepSeek V4.1 Flash$285 billion in 2028
- Kimi K3.1 Proturning positive in 2028
Cloud growth cools to about 30%, with Cloud near $205B to $253B. Backlog conversion keeps adding revenue, but growth slows on a much larger base.4 of 6
- GLM 5.3about 30% in 2028 as the backlog converts
- Kimi K3.1 ProCloud grows rapidly through 2027 from backlog and accelerator systems, then normalizes
- Opus 5.5$205 billion in 2028
- GPT-6.1 Sol$253 billion in 2028
The operating margin holds near 34% as revenue catches up with depreciation. AI servers pay back in under two years, the Cloud chief said in September.4 of 6
- GLM 5.3recovers to about 33% in 2028
- GPT-6.1 Sol35.3% in 2028
- DeepSeek V4.1 FlashI do not model a Cloud margin collapse even as spending surges
- Kimi K3.1 Proscale largely offsets depreciation and near-term capacity costs
If all of this happens
$713Bsales
$15.84adjusted EPS
$300BCapital spending
−$5.83BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Cloud growth falls back as chip shipments slip and enterprises pause AI spending. Capacity depends on power, water and land, and chip revenue is booked only on delivery.6 of 6
- GLM 5.3Cloud growth falls back toward 35-45% as TPU shipments slip and enterprise AI spending pauses to digest
- GPT-6.1 SolDelayed capacity delivery and chip-system shipments
- Opus 5.5Cloud capacity shortfall and slower backlog conversion
- Kimi K3.1 ProDelayed Cloud capacity and accelerator-system deliveries
- Muse Spark OpenCloud expansion slows and third-party capacity creates margin pressure
- DeepSeek V4.1 FlashGoogle Cloud sequential growth stalling near $1.5-2 billion a quarter as TPU system deliveries slip into 2027
A consumer downturn cuts advertising budgets. Oil neared $115 a barrel at the cutoff and consumer sentiment was 51.7, against 58.2 a year earlier.6 of 6
- GLM 5.3A consumer downturn (sentiment 51.7, mortgage 7.3%) cuts advertising budgets across Search, YouTube and Network
- GPT-6.1 Solan energy and financing shock weakens advertising
- DeepSeek V4.1 FlashAdvertising slowing as expensive energy squeezes consumers and a five per cent ten-year yield trims budgets
- Opus 5.5high oil prices and a stronger dollar trim advertising budgets
- Kimi K3.1 ProSlower Search and YouTube advertising growth
- Muse Spark OpenSearch and YouTube growth slows to low single digits on macro and lapping
Depreciation and energy costs outrun revenue, pushing the margin well below 34%. Spending near $300B a year keeps adding depreciation whether or not revenue follows.6 of 6
- GPT-6.1 SolInfrastructure depreciation, rented capacity and research spending do not fall as fast as sales.
- Opus 5.5depreciation and rented capacity costs
- GLM 5.3Operating margin compresses as depreciation, third-party capacity costs and supply-chain inflation outrun revenue leverage
- Kimi K3.1 ProHigher infrastructure and energy costs
- Muse Spark OpenDepreciation and AI talent costs rise faster than sales
- DeepSeek V4.1 FlashDepreciation from about $200 billion of 2026 spending running ahead of revenue
Search slows to single digits as AI assistants and search remedies take hold. The search judgment requires data sharing and syndication to competitors; appeals play out over 2027 and 2028.4 of 6
- GLM 5.3Search decelerates to single digits under AI substitution and DOJ search remedies (data sharing, syndication, distribution restrictions)
- GPT-6.1 SolAdverse legal remedies or additional charges
- Kimi K3.1 ProForeign-exchange and regulatory pressure
- DeepSeek V4.1 Flashit is one of the reasons the low case exists rather than a reason to cut the middle
If all of this happens
$602Bsales · −16% vs base
$11.87EPS · −25% vs base
Revenues would have to land near $602B, about 16% under the base, with earnings per share near $11.87, about 25% lower. The AI build would have to digest: Cloud growth falls back as enterprises pause, Search slows to single digits under AI substitution and search remedies, and a consumer downturn cuts ad budgets while depreciation keeps climbing. Sol's low is furthest, at $570B and $9.50 a share, because it stacks an energy and financing shock, legal restrictions and costs that do not fall as fast as sales on top of delayed capacity.
More than 70% of 2025 revenues came from online advertising, so an ad downturn hits most of the company at once.
The six lows run from $570B (GPT-6.1 Sol) to $625B (DeepSeek V4.1 Flash).
First signQuarterly Search growth falling toward single digits, or Cloud backlog failing to grow from one quarter to the next.
Highabout 1 chance in 10 of better
What the high case assumes
Faster capacity and new large contracts keep Cloud growing well above the base's 30%. New customer wins and large deals doubled from a year earlier, the Cloud chief said.6 of 6
- GPT-6.1 SolFaster conversion of cloud commitments and additional large contracts
- Opus 5.5more capacity unlocking backlog
- GLM 5.3TPU system shipments ramp faster than planned and new mega-deals pull revenue forward from 2027 into late 2026
- Kimi K3.1 ProFaster Cloud capacity and accelerator-system delivery
- Muse Spark OpenCloud backlog 514 billion converts faster with new customers doubling
- DeepSeek V4.1 FlashFaster conversion of the $514 billion Cloud backlog and earlier TPU system revenue
Search monetization strengthens as AI Mode widens the queries that carry ads. AI Mode passed one billion monthly users, and the company says it adds to Search queries overall.6 of 6
- GPT-6.1 SolImproved search advertising coverage and subscription pricing
- GLM 5.3Search sustains 17%+ growth as AI Mode monetization expands ad coverage to previously unmonetizable queries
- DeepSeek V4.1 FlashSearch monetisation of longer, previously unmonetisable AI queries
- Opus 5.5AI Mode and agentic commerce advertising
- Muse Spark OpenSearch queries hit new highs on AI Mode with over one billion users driving upside
- Kimi K3.1 ProSustained strong Search and subscription growth
Operating leverage lifts the margin above the base's 34%. Cloud's operating margin rose to 35.6% in the second quarter from 20.7% a year earlier.6 of 6
- GPT-6.1 SolEfficient internal capacity replacing expensive rented capacity
- GLM 5.3Cloud operating margin keeps expanding beyond 35.6% as internal capacity replaces costly third-party bridging capacity
- Opus 5.5operating leverage in Cloud
- Kimi K3.1 ProBetter-than-expected Cloud operating leverage
- Muse Spark OpenOperating leverage from AI efficiencies and pricing power
- DeepSeek V4.1 FlashOperating leverage outrunning depreciation and energy costs
Enterprise AI products and subscriptions grow faster than expected. The Cloud chief cited more than 17 product lines each above a billion dollars, growing quickly.3 of 6
- GPT-6.1 SolStrong adoption of enterprise agents, data and security products
- GLM 5.3Subscriptions (Google One AI plans, YouTube Premium) compound above 20% growth
- Kimi K3.1 ProSustained strong Search and subscription growth
If all of this happens
$835Bsales · +17% vs base
$20.27EPS · +28% vs base
Revenues would have to reach about $835B, 17% above the base, with earnings per share near $20.27, about 28% higher. Capacity would arrive sooner, new large contracts would keep converting, Search monetization and subscription pricing would hold, and cheaper in-house chips would replace rented capacity. Sol's high is furthest, at $970B and $26.00 a share, because it lets these compound from the largest Cloud base, near $253B in its middle, with operating leverage lifting earnings substantially.
The Cloud chief said in September that AI servers pay back in under two years and that customers often spend well above their commitments.
The six highs run from $758B (DeepSeek V4.1 Flash) to $970B (GPT-6.1 Sol).
First signCloud growth staying above 80% with stable margins, and operating cash flow catching up with capital spending sooner.
Watch
The 2027 capital spending range and quarterly backlog first, then rulings in the search and ad technology cases. Backlog that keeps growing and spending growth that slows point higher; Search slowing toward single digits or depreciation outrunning revenue point lower.