I keep buying Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction), and last weeks earnings gave me another reason to add. For three years I have been asking one question about this position: is the AI spend actually turning into revenue that scales? Q2 answered it plainly.
Google Cloud grew 82% year over year to $24.77 billion. That is a fourth straight quarter of accelerating growth off a base already at scale: 34%, then 48%, then 63%, now 82%. Sundar Pichai told shareholders “nearly 90% of the Fortune 100” is now using Gemini Enterprise. That is a competitive moat forming in real time, and it is why I keep coming back to the buy button.
The Numbers Behind My Conviction
Revenue landed at $119.80 billion, up 24.23% YoY, the 12th consecutive quarter of double-digit growth. EPS printed at $9.11 against a $3.0427 estimate, the 11th consecutive beat. Operating income rose 30.38% to $40.77 billion, with operating margin expanding 2 percentage points to 34%. Alphabet is growing at the top and widening the funnel at the same time.
The AI adoption data is what convinces me the growth is durable. Gemini API traffic reached 22 billion tokens per minute, up from 7 billion three quarters ago. The Gemini App now has 950 million monthly active users, versus 650 million in Q3 FY25. Search itself grew 17% because AI features are lifting query volume, not cannibalizing it. That is the payoff I was waiting on.
The balance sheet supports the aggression: cash and equivalents at $55.91 billion, shareholders’ equity at $640.48 billion, and the dividend was raised 5% to $0.22 per share. Yield is thin at 0.50%, but the direction of travel is what a long-term holder wants.
Why Not Microsoft, Meta, or Amazon?
Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN) are the names a retirement-focused reader reaches for first, and I own pieces of them. What tips my next dollar toward Alphabet is the Cloud acceleration curve: 34% to 48% to 63% to 82% across four quarters, off a segment that just cleared $24.77 billion in a single quarter and a Q1 backlog above $460 billion. Paying 27x earnings for that runway, at a $4.24 trillion business, is a trade I keep making.
The Risk I Actually Take Seriously
Free cash flow went to -$5.86 billion in Q2. CapEx hit $44.92 billion for the quarter, guided to $175 billion to $185 billion for FY26. Long-term debt roughly doubled from $46.5 billion to $98.2 billion, interest expense rose nearly 5x, and the buyback was suspended.
None of that should surprise a shareholder paying attention. It is a choice. The cash position covers it, the demand is verifiable in Cloud revenue, and operating cash flow still climbed 40.8% to $39.07 billion. When a business earns cash at that rate and elects to reinvest at this pace, I want more shares.
Why the Buy Button Stays Green
Cloud is accelerating, Gemini is monetizing, Search kept growing with AI layered on top, and the operating margin is 34%. Analyst consensus target sits at $433.51 with 57 buys and zero sells, but that is background. The retirement version of my thesis is this: I own a business earning cash faster than it can spend it, funding the AI cycle from its own P&L, and winning the enterprise category as it forms. Every dip finds me back at the same screen buying the same ticker.
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