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Alphabet Inc.'s continued growth in its cloud business could offer a positive medium-to long-term outlook for Indian IT companies, despite near-term uncertainty, according to Nuvama Institutional Equities.
Nuvama noted that strong growth in Google's cloud business over the past four quarters, reflected in Alphabet's higher capex guidance, signals continued enterprise investment in strategic initiatives. The tech giant's cloud revenue increased 81.8 per cent on YoY in the latest quarter supported by solid growth in core GCP, AI solutions and AI infra, including first time TPU system sales while Cloud growth stayed strong even excluding this contribution. At the same time Google Services revenue surged 15 per cent YoY to stand at USD 94.5 billion on strong search and subscription growth. Likewise, advertising revenue grew 14 per cent YoY, led by broad-based growth across verticals and World Cup related YouTube demand. Search advertising rose 17 per cent YoY while YouTube ads grew 13 per cent YoY. Subscriptions revenue rose 15 per cent YoY, driven by YouTube Premium, Google One and AI plan adoption. The report further noted, Alphabet's Q2 EBIT margin expanded 160 basis points year-on-year to 34 per cent, while its Cloud business maintained strong momentum on sustained demand for AI infrastructure and solutions. It noted, Google's Cloud backlog reached USD 514 billion, with over 50 per cent expected to contribute to revenue over the next 24 months. Cloud operating margin widened sharply to 35.6 per cent, up 270 basis points sequentially and 1,490 basis points year-on-year. Q2 capex stood at USD 44.9 billion, primarily driven by technical infrastructure, prompting management to raise its 2026 capex guidance to USD 195-205 billion from USD 180-190 billion, with further significant growth expected in 2027. "Strong Cloud growth demonstrates continued investment by the enterprise on strategic initiatives. While the near-term environment remains laden with uncertainty for Indian IT companies--growth in the cloud business for Alphabet (and peers) bodes well from a medium to long-term perspective," the brokerage house said. (ANI)
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