Alphabet's Next Growth Cycle
Summary
- Google Cloud revenue reached $13.6 billion in Q2 2025, up 32% year-over-year, with operating margin expanding from 11.3% to 20.7%.
- Proprietary TPU systems deliver 2x efficiency and 50% performance gains, enabling nine of the world’s largest AI labs to run on Google Cloud.
- Q2 CapEx surged to $22.4 billion, with 2025 guidance raised to $85 billion, two-thirds directed to servers, compressing near-term free cash flow.
- Alphabet’s Cloud backlog reached $106 billion, up 38% year-over-year, providing visibility for sustained high-margin growth if conversion remains on track.
- Shares trade at 25.6x trailing P/E and 24.2x forward P/E, a premium versus sector medians of 20.8x and 19.5x.
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