GOOG 42% Up Since Our July 29 Call , Wen JET ?
Alphabet’s stock has nearly doubled since April, despite constant chatter about OpenAI threatening Google’s core business. So, what’s driving the rally?
Regulators have eased up at least for now. The idea of forcing Google to spin off Chrome is off the table, removing one of the biggest overhangs.
Anthropic has signed a massive deal to use up to one million Google Cloud TPUs, adding more than 1 gigawatt of AI computing power by 2026. The contract is reportedly worth tens of billions, setting up a clear boost for Google Cloud’s revenue. Wait, what are TPUs?
Tensor Processing Units are Google’s custom AI chips, built to train and run large models faster and more efficiently than standard GPUs. They’ve powered Search and Translate since 2016 and became available on Google Cloud in 2018. What’s new now is scale Anthropic’s deal marks the first time an outside AI lab has deployed TPUs at hyperscale, turning them from a niche tool into a real alternative to NVIDIA’s GPUs.
It’s a big win for Google’s chip business. If more labs follow Anthropic’s lead, TPUs could turn into a meaningful growth driver even for a company already worth over $3 trillion.
Alphabet Q3 FY25
Revenue: $102.3 billion, up 16% year-over-year and $2.2 billion above expectations.
Advertising: $74.2 billion (+13%)
Search: $56.6 billion (+15%)
YouTube Ads: $10.3 billion (+15%)
Network: $7.4 billion (-3%)
Subscriptions, platforms, and devices: $12.9 billion (+21%)
Cloud: $15.2 billion (+34%)
Margins:
Gross margin: 60% (+1 point Y/Y)
Operating margin: 31% (-2 points Y/Y)
Services: 39% (-2 points Y/Y)
Cloud: 24% (+7 points Y/Y)
Earnings: EPS rose 35% to $2.87, beating by $0.61.
Cash flow: Operating cash flow jumped 58% to $48.4 billion; free cash flow rose 39% to $24.5 billion.
Balance sheet: $98.5 billion in cash and securities; $21.6 billion in long-term debt.
What it means ?
Alphabet crossed the $100 billion quarterly revenue mark for the first time, with net income up 33% to $35 billion.
Search: Up 15%, led by retail and finance. New AI features like “AI Overviews” and “AI Mode” are driving engagement instead of cannibalizing it.
YouTube Ads: Also up 15%, powered by both brand and direct-response campaigns. Shorts hit 200 billion daily views, and YouTube Premium pushed total paid subs past 300 million.
Subscriptions and devices: Up 21%, now a $50 billion annual business thanks to Google One and Pixel hardware.
Cloud: Growth accelerated to 34%, topping $50 billion in trailing 12-month revenue with a record $155 billion backlog. Operating income surged 85% to $3.6 billion.
Margins held steady even with record AI infrastructure spending. Alphabet lifted its 2025 capital spending forecast to $91–93 billion, most of it for data centers, TPUs, and AI capacity—the foundation for Gemini and Cloud.
Alphabet is firing on both sides of the AI economy monetizing it through ads and subscriptions while powering it through Cloud and compute. Growth is reaccelerating, margins are solid, and spending is positioning it for the long haul.
Anthropic’s deal spans training, inference, and dedicated compute making it the first large-scale external deployment of Google’s own AI chips.
These kinds of partnerships are as much about long-term strategy and recurring revenue as they are about upfront numbers. And for Google, it’s a sign that TPUs may finally have their moment
Bags packed for the next leg up or are you hitting that take profit button before the rocket refuels? 🚀