Alphabet's strong cloud performance offers long-term positive signal for Indian IT sector: Report
New Delhi, July 24
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
Reader Comments
Good news for our IT sector, but I worry about over-dependence on US tech giants. With Alphabet's massive capex and cloud backlog, Indian IT companies must negotiate better terms. We can't be just cost arbitrage forever—we need our own IP and cloud platforms. Hope our policymakers and industry leaders are watching this closely.
Interesting perspective from an Indian brokerage. Google is clearly investing heavily in AI infrastructure. The 81.8% cloud revenue jump and 35.6% margins show this isn't just hype. For Indian IT, this could mean more work in cloud migration, AI implementation, and data analytics. Just hope they can manage the talent crunch.
Arre, this is exactly what we needed to hear! With Google raising capex guidance and cloud backlog crossing $500 billion, Indian IT companies like TCS, Infosys, and Wipro will have plenty of opportunities. But we must also focus on AI and cloud-native skills—the days of simple maintenance work are numbered. 🚀
While this is positive for the global IT ecosystem, I'm a bit cautious. The near-term uncertainty mentioned in the report is real—geopolitical tensions, inflation, and potential slowdown in discretionary spending. Indian IT stocks have rallied on AI optimism, but actual revenue conversion may take longer than expected. Still, the long-term trend is unmistakable.
The $514 billion cloud backlog is mind-boggling! For Indian IT, this means sustained demand for cloud engineering, AI model deployment, and managed services. Our companies have the talent pool and delivery capabilities. The key will be moving up
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