The headline here is from a Scotia report on Google’s earnings.
“If
Google’s stock can’t rally on this print, it’s tough to see any other names working in this tape.”
GOOG stock is down 2.7% at the moment, albeit that’s a nice improvement from the 5% decline earlier. There is some improvement elsewhere but I’m going to keep a close eye on Google today to see if it can turn around before the close.
If you zoom out, Alphabet just delivered a quarter for the history books.
| Metric | Actual Growth | Wall Street Est. | “Bull” Case Est. |
| Search Revenue | 17% | ~13.4% | 16% |
| Google Cloud (GCP) | 48% | 36% | 40% |
The most striking figure was the 750 million Gemini Monthly Active Users —an increase of 100 million in just three months.
Just a year ago, the consensus was that Google had lost its edge to OpenAI. Today, that narrative has reversed. Investors now increasingly view OpenAI as the “structural loser,” burning through massive capital only to be outperformed by Google’s scale and integration.
Now Google is ramping up its spending even more and that’s what has dragged on the stock today. It’s forecast at $175-185 billion compared to the street at $115 billion.
Will it make money?
“The more capital we can free up within the organization to invest, the better we can turn this flywheel of making investments to drive future growth,” said executive Anat Ashkenazi.
Ashkenazi described their approach to ROI as a “highly rigorous framework” that evaluates the total envelope of investment to ensure it drives both near-term results (like the 48% Cloud growth reported) and long-term Frontier model development.
It’s hard to bet against Google at this point given they’ve cranked out some impressive stuff with Gemini but execution is tricky.
As for the broader market, the sentiment from Scotia is right and it’s underscored by drops in Meta and Microsoft, who also posted impressive quarters that included higher spending. Microsoft is now down to a 24x P/E multiple on 2026 estimates.
Here is how Scotia values GOOG stock:
“Even despite the transition from an AI loser to winner, the valuation isn’t stretched
at all. We reiterate our Sector Outperform rating, and increase our PT to $400 (from $375
prior), entirely on our upward estimate revisions, while our ~30x P/E multiple remains the
same. Any multiple expansion is just icing on the cake – even just simply on EPS growth,
Google is an attractive investment in a tough tape.”
On their current forecast of EPS of $14.59 for 2027, shares trade at 22x.
