Google surges 10%! Cloud revenue up 63% YoY, becoming a perpetual motion machine? Computing power is never enough to sell.

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Alphabet surged 10% after its Q1 2026 earnings report, marking a 34% gain in April, its best month since its 2004 IPO. The primary driver was Google Cloud revenue, which grew 63% YoY to $20 billion, far exceeding analysts' expectations of $18.4 billion. CEO Sundar Pichai stated that the company is currently "compute-constrained," noting that cloud revenue could have been even higher. (Context: Meta fell over 7% in pre-market trading: Q1 revenue and profit both beat expectations, but AI capital expenditure was revised upward to $145 billion.) (Background: Altman at the Stripe annual conference: OpenAI aims to be "forever low-margin" intelligent infrastructure.) Alphabet closed up 10% to $381.94 on April 30, with a cumulative 34% surge in April, marking its strongest month since its 2004 IPO. Q1 revenue was $109.9 billion (+22% YoY), significantly beating Wall Street's expectation of $106.8 billion; adjusted earnings per share were $5.11, nearly double the analysts' estimate of $2.63. Net income was $62.58 billion, up 81% YoY. The star was Google Cloud. Cloud revenue reached $20 billion, up 63% YoY, far exceeding the expected $18.4 billion, with the operating margin jumping from 18% in the same period last year to 34%, and the order backlog nearly doubling quarter-over-quarter. CEO Sundar Pichai stated during the earnings call that the company is "short-term compute-constrained, and cloud revenue could have been higher." Wall Street responded quickly, with Scotiabank raising its target price to $450 and Barclays setting it at $405. In contrast to Meta, the market's reaction to capital expenditure was brutal. Alphabet revised its 2026 capex guidance upward to $180-190 billion (from $175-185 billion), and the market accepted it. Meta similarly raised its guidance by $10 billion to $125-145 billion but was cut by 8.5%. The difference lies in the fact that Google Cloud has already proven with 63% revenue growth that AI investments are paying off, whereas Meta's AI capex has yet to see a corresponding scale of revenue return.

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Published:2026-05-01 00:51:04

Category:bullish · Export Category bullish

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