$GOOGL · The Motley Fool · 2026-10-28

Although later today we do have Alphabet and Microsoft report. But yeah, for for the AI story, I would say Microsoft and Google are are the big stories later later today.

I'll just kind of give my overview like for Alphabet in particular, that's the one of these big hyperscalers that I own as an investor. Um the the concern for the last couple of years has been that search is going to get destroyed by artificial intelligence.

We have not seen that in the numbers, but I think we have seen people using search and using these pieces of new pieces of technology, whether it's something like Muse, whether it's catchb uh differently.

So, we're maybe using goo, you know, search a little bit less. Doesn't mean that they're necessarily monetizing any less.

So, what I guess I'm going to be watching, do we have the same kind of momentum that we had from a revenue growth perspective uh there?

And then the other one to compare it to would be YouTube. If YouTube is growing faster than searches, that would indicate that because YouTube is taking market share. YouTube, I think, is doing extremely well.

But if the YouTube is growing faster, that's telling you that the usage on search is on a relative basis not growing as fast as YouTube's because those should monetize on a relatively similar basis, you know, at least year-over-year or quarter over quarter directionally.

So, um, that's going to be the big thing that I'm going to be watching because that's the core business, you know, the rest of it. GCP, the capex number, all that stuff is future growth.

Obviously, the market's going to be focused on that. But the the near-term worry is a is this behemoth of a business going to be disrupted? And it seems like any little tiny hint of disruption is absolutely crushed by the market.

Yes. So the thesis for me was always about could the rest of the business ex which means everything excluding search revenue wise reach more than 50% of revenue be before Google has to disrupt itself completely with search.

Every single quarter we are getting closer to that 50/50 split purely because Google cloud is just growing much much faster and becomes bigger and bigger also more profitable. So at least that that would mitigate the risk the risk a little bit.

On the other hand, I do think that over the last couple of quarters, Google search did grow way faster than most predicted. And so the numbers right now I do think are going to come down naturally.

But look, if they can monetize AI overview as well as they did uh traditional search, then then so be it. But yeah, as we go into this agentic way of looking for things, I I guess they they should be looking at other ways to monetize.

So, it's going to be interesting. Google does have the I mean the diversification with with YouTube, with some subscriptions, with especially Google Cloud. So the the heat will not be a major hit, but for the long-term future, like I don't know, 5 10 years from now, yes, it would definitely look different than than what it is today.

it impacts the companies that are going to report tonight, Google and Microsoft, two of the the biggest counterparties for anthropic. hundreds of billions of dollars in revenue already contracted to I believe both of them when you add them together.

Google is 114.5 approximately.

Uh this is just the alphabet estimates. Uh this is revenue estimates. So what I'm looking at here is the average uh estimate for the quarter. 128 billion. A year ago that was only $102 billion.

That is a that's a pretty sizable jump in revenue and I think probably indicates that there's very high expectations once again for the cloud business. Uh earnings per share. I haven't even looked at this but uh going to be all over the place again.

Yeah 301. So not a lot of operating leverage in the business right now. Probably not surprising given all the expenses that they have in growing the business.

I think one is capex capex number maybe increasing could could potentially be one of the things that 2026 is going to increase or are you looking at like comments about 2027? Yeah, if we can get some comments on 27 that would be some real comments not the it's going to go up significantly the but if we can get some number maybe but 26 I can't remember what the midpoint is so maybe the midpoint just goes up this is what what we've seen with meta then cloud I do think that cloud could potentially grow 100% year-over-year so last quarter it increased by 81 82% this quarter could potentially reach 100% growth plus saw some margin expansion there and if that happens then I guess it makes sense why they want to grow capex even more cloud is working very well the TPU business is definitely doing very well and we will hear way more on the TPU business in 27 YouTube could YouTube see an acceleration in growth I think that would be great because for the last couple of quarters I don't think the growth there has been wow um that's true So, I'm I'm again I'm expecting a very good quarter.

I also think that free cash flow is probably still going to be negative. So, yeah, I'm I don't know what the stock will do. And honestly, I don't really care what the stock will do in the short run, but I do think that this is it's just one of the best businesses on the planet.

So, they they they'll do what they what they think is best. And for now, it seems like they're just trying to move as fast as possible and moving a company that generates over $120 billion in revenue for a quarter.

I mean, it takes it takes quite a lot. Takes quite a lot, but uh yeah, I'm expecting a very good report.

The the thing that I think is such an interesting conundrum with them is I think over the last year in particular, they have shown that they are one of the best research companies in the world.

Even even their latest model, again, I'm not going to get these names of the models correct, but their latest the latest video model looks incredible. And then I go try I tried to use Spark.

I I paid for something. I don't even know how to get back into Spark or if I'm just not going into G like their whole product portfolio is just so confusing and it's such a mess.

Um, you know, I try I I try to try most of these new agent things. Like I tried Muse, I've tried Harkc. I tried Spark. Um, they're all kind of the same and Spark, but Spark is definitely the worst that I have used.

And it should be the easiest because all I'm asking it to do is stuff related to my mail that that I'm tied to. You know, hey, uh, make sure that this stuff is on my calendar. Flag these

Yeah. because it's because it's good enough for the majority of people. That's that's the thing for for the heavy users. Let's say for Yeah. First of I didn't even know what Spark was until I had to search for and no actually until I listened to Sundar's podcast I think a week or two ago.

But yeah, that's the thing. That's something I've been saying for a while. It's the product side of of Gemini is horrendous. Why why do we need can notebook LM Google studio there is another thing out there then there is Gemini itself like why is everything so complicated why are there so many products and if there are that many products everything should be on one one page where that page if it's if everything's Gemini today Gemini should be able to pull things from multiple products

if I compare Gemini to uh OpenAI or or Antropics Cloud or even Grogbot I've been using Grogbot quite a lot now over the last week. It's very easy to use. It's super easy to use, super easy to set up.

But let's compare just cloud and and uh Chad GPT to to Gemini. It's night and day. Still even 2026. Everything is very organized. There not that many things that you need to understand or do.

With Gemini, it's I know it feels like they're they're way more focused on building data centers, the cloud business and maybe just the the the API and things like that and really not that focused on on the consumer.

But then again, I mean, if they tell us that Gemini has a billion monthly active users, then then I guess who cares? Then I guess who cares? Yeah. And frankly, even as much as I use all these things, I probably use uh AI overuse more than any of them because it's super easy to just if you're looking for a simple answer, it's it's going to be right there and more often than not, they're going to get it right.