Q3 2026 · the quarter GOOGL reports
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.
Q4 2026 · the quarter after
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.
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.