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GOOGL · Forward model · Google Cloud · Bear case

What has to happen in Google Cloud

Model as of

This page changes Google Cloud inside the complete GOOGL model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

GOOGL forward model
Horizon
Consolidated fair value $113.15 all other verticals held in this portfolio case
Final-quarter revenue $39.81B 31% of company revenue
Explicit segment contribution −$235.14B EBITDA less segment capex, before corporate items

Search AI substitutes for queries, Cloud utilisation misses the $514B backlog, and capex stays elevated into 2028. What this case does NOT assume is a Chrome divestiture or a collapse of YouTube. It says 2026 was the peak growth year and the build does not earn its cost of capital.

Google Cloud

Basis quarter$24.77B
Final quarter$39.81B
Implied CAGR+10%
Final revenue mix31%

GCP, Workspace and, from Q2 2026, TPU system sales. $24,768M in the basis quarter, +82%, sequential +24% from Q1 $20,028M. Operating income $8,814M, margin 35.6% vs 20.7% a year ago. Backlog ~$514B is contracted work, not live MW. No utilisation series, so sequential growth on the filed total.

Last four quarters
2025 Q3 $15.16B Reported
2025 Q4 $17.66B Reported
2026 Q1 $20.03B Reported
2026 Q2 $24.77B Reported
Google Cloud Platform (AI infrastructure and solutions)Google WorkspaceOther enterprise cloud servicesTPU system sales
Sequential growth +10.0%/qtr decaying toward +2.5% Q2/Q1 was +24%. 10% QoQ is ~46% annual, half of +82% YoY, not a repeat of the TPU step.
Google Cloud

Latest: $39.81B (2031Q2E)

Period Value
2025Q1 $12.26B
2025Q2 $13.62B
2025Q3 $15.16B
2025Q4 $17.66B
2026Q1 $20.03B
2026Q2 $24.77B
2026Q3E $26.56B
2026Q4E $28.22B
2027Q1E $29.73B
2027Q2E $31.09B
2027Q3E $32.31B
2027Q4E $33.41B
2028Q1E $34.37B
2028Q2E $35.23B
2028Q3E $35.97B
2028Q4E $36.63B
2029Q1E $37.20B
2029Q2E $37.69B
2029Q3E $38.12B
2029Q4E $38.49B
2030Q1E $38.81B
2030Q2E $39.08B
2030Q3E $39.31B
2030Q4E $39.51B
2031Q1E $39.67B
2031Q2E $39.81B

Assumptions & reasoning

  • Do not use 24% sequential as the opening rate. That quarter includes first TPU system sales. 10% QoQ is already a very fast cloud.
  • Backlog ~$514B is call-only and is remaining performance obligation, not capacity in MW. It is the named case, not a capacity driver.
  • Cloud FCF is deeply negative at 50% EBITDA minus 140% capex. That is the point of the model, not a bug. 2027 capex is guided higher, so intensity glides slowly.
  • Segment operating income is disclosed at 35.6%. D&A by segment is not. The 50% EBITDA is assumed as operating income plus most of company D&A.
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