Google Cloud Growth Stalls Amid Talent Drain and Cash Flow Concerns

Alphabet's AI story is currently split between two opposing views. On one hand, Google Cloud posted its fifth consecutive quarter of accelerating growth, with revenue up 82% year-over-year to $24.8 billion and operating margin nearly doubling from 20.6% to 35.5%. Additionally, the company started recognizing revenue from its own TPU chips for the first time, shipping custom silicon directly into customer data centers.

However, a bear case is also emerging. Deepwater Asset Management's Gene Munster warned that Google has lost roughly six senior AI researchers in the past three months, which could hurt its innovation culture. He also pointed out that Gemini has started slipping in AI model rankings versus rivals.