Here's what will take center stage as Alphabet gears up for earnings

By Christine Ji

Alphabet needs to prove that its massive investments in AI are driving revenue growth. The biggest payoff could be in the cloud.

Google recently expanded its partnership with Anthropic for several additional gigawatts of custom TPU capacity.

Alphabet's stock has been a popular artificial-intelligence pick, and the company's first-quarter earnings report on Wednesday will be a test to see if that winning reputation is warranted.

Shares of Alphabet (GOOGL) (GOOG) have risen 119% year to date, making them the top performer among the "Magnificent Seven" group of tech stocks.

"We expect another strong beat as the Street continues to underestimate what Google Cloud, AI-powered search and YouTube can grow into," Wedbush analyst Dan Ives wrote in a note last week.

Expectations for earnings are high after last week's Google Cloud Next conference, where the company unveiled two new tensor processing units as well as agentic AI applications for Gemini. Last quarter, the Gemini app had over 750 million monthly active users, and investors will be on the lookout for more signs of increased adoption in the beginning of 2026.

For the first quarter, Wall Street analysts are looking for total revenues of $107 billion, which would mark a 19% year-over-year increase, and $2.63 in earnings per share.

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While the majority of Alphabet's revenue comes from search, the biggest focus of Wednesday's report will be Google Cloud. Last quarter, the company said that it plans to spend $175 billion to $185 billion on capital expenditures in 2026. Alphabet, along with the rest of the hyperscalers, will need to show investors that the elevated spending can accelerate cloud growth.

Cloud revenue is expected to grow 47% year over year to $18 billion, according to FactSet estimates, but Ives believes Alphabet can exceed 50% growth this quarter given Google Cloud's growing backlog and custom-chip advantage. Earlier this month, Anthropic expanded its partnership with Google for several gigawatts of TPU capacity, and last week Google announced plans to invest up to $40 billion into Anthropic.

Read: Google debuts two custom chips in latest bid to challenge Nvidia's dominance

Jefferies analyst Brent Thill is confident that demand for AI compute is continuing to accelerate. Industry checks from Jefferies at Google Cloud Next showed increasingly positive sentiment for Google's trajectory and earnings results this week.

On top of cloud revenue growth, investors will be looking for key data points regarding new cloud deals and data-center capacity additions, Thill wrote in a note last week. Alphabet ended 2025 with $240 billion in backlog.

However, Thill noted a caveat that Alphabet's "valuation could limit upside" for the stock, even with an earnings beat. Shares are trading at 28.7x forward earnings, according to FactSet.

-Christine Ji

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04-28-26 1142ET