Table of Contents
a. Demand
Beat revenue estimates by 2.3%. The company impressively d elivered 23% Y/Y constant currency (CC) growth compared to 19% CC growth last quarter and 13% CC growth last year. This is mostly related to cloud, although search did show a nice 5-point growth acceleration compared to Q2 2025 as well.
Met search revenue estimates.
Beat YouTube revenue estimates by 2.3%.
Beat cloud revenue estimates by 10.7%. The cloud backlog reached $514B compared to $106B last year and $462B last quarter.
A little over $250B will be recognized in the next 8 quarters.
Roughly 40% of the backlog is from Anthropic.
b. Profits & Margins
Beat EBIT estimates by 1%. EBIT rose by 30% Y/Y.
Operating expenses rose by 27% Y/Y due to 32% Y/Y R&D cost growth via AI talent and more data center depreciation.
Crushed EPS estimates, but that was all related to SpaceX and Anthropic gains. EPS was $2.86 vs. $2.90 estimates and rose by 23% Y/Y excluding this help.
Missed $46B operating cash flow estimates by $7B.
Missed $3B FCF estimates by $8B. $44.9B in capital expenditures (CapEx) was $4.5B larger than expected.
c. Balance Sheet
$240B cash, equivalents & marketable securities.
$98B debt. It issued $20B in unsecured notes during the quarter.
1% Y/Y dilution. It issued over $80B in equity last month including a $40B at-the-market program (draw-down as you want to) that they have not begun using yet. This facility is to cover tax liabilities from stock-based compensation. They do not anticipate more equity raises in the immediate future.
d. Guidance & Valuation
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