Alphabet Cloud Revenue May Exceed Estimates Amid Capex Concerns

Alphabet's second-quarter earnings report is set to kick off the tech earnings season, with investors closely watching cloud revenue growth and capital expenditure trends. According to Gene Munster, Alphabet's cloud revenue may jump over 65% year-over-year, exceeding estimates of a 63% increase.

Cloud revenue contributes around 15% to total Alphabet revenues, and Google's cloud business saw a record revenue growth of 63% in the quarter ending March 2026. Analysts are expecting Q2 cloud growth similar to Q1 levels.

Retail sentiment on Stocktwits for GOOGL was 'extremely bullish' ahead of the earnings report, with shares holding their ground despite investor focus shifting from cloud revenue to capital expenditure outlook. Alphabet's management has yet to provide a number for its 2027 capex spending plans, but Citi thinks capex levels can breach $300 billion in 2027.

The focus on capex and cash flows is due to the increasing spending on data centers to fuel large-scale AI plans. Hyperscalers such as Microsoft, Alphabet, Amazon, Meta, and Oracle are expected to generate around $340 billion more in annual operating cash flow in 2027 than in 2025, but capex is expected to rise by roughly $534 billion.