Alphabet Stock Surge Tracked By Google Cloud Margin Growth
Alphabet's stock has risen by 71% over the past year, significantly outperforming the S&P 500. This surge can be attributed to a single segment that is converting growth into profit: Google Cloud.
Between fiscal Q2 2024 and Q2 2025, Google Cloud's operating margin nearly doubled from 11% to 20.7%. Meanwhile, revenue growth across these periods remained relatively steady between 29% and 35%, indicating that the segment is scaling faster than its cost base.
The capacity build for Alphabet was also supported by a growing backlog of $106 billion in Google Cloud, up 38% year over year. This suggests that the company had contracted for capacity before building it, which ran on chips designed by Alphabet itself.
By fiscal Q2 2026, growth finally caught up to margin: Google Cloud revenue grew 82% to $24.8 billion, and segment operating margin reached 35.6%. The backlog also more than quadrupled to $514 billion in the same period.