Alphabet Inc (NASDAQ:GOOG) is set to post a blockbuster second quarter, according to Bank of America, which reiterated its Buy rating and raised earnings estimates on surging Cloud growth and a sharp jump in the value of the company’s Anthropic stake.
The bank expects Alphabet to report second-quarter revenue of $102.1 billion and EPS of $8.38, well above Street estimates of $101 billion and $2.90.
The EPS gap is largely driven by an estimated $80 billion boost to second-quarter operating income from the revaluation of Alphabet’s Anthropic stake, after Anthropic’s valuation rose from $380 billion in the first quarter to $965 billion in the second.
Analysts pointed to strong retail search growth heading into the print, though they flagged some softness in CPG and travel. They trimmed search growth estimates slightly for currency effects but still expect 17% growth, ahead of Street forecasts.
Cloud growth estimates were raised to 70%, supported by demand indicators and a backlog suggesting at least $230 billion in revenue over the next eight quarters.
For full-year 2026, Bank of America raised its net revenue estimate by 1% to $427 billion and its EPS estimate by 36% to $19.70, now projecting 16% full-year search growth and 72% Cloud growth.
For 2027, the bank raised net revenue estimates by 3% to $537 billion and EPS by 1% to $14.70, with Cloud revenue from the second quarter of 2026 through the first quarter of 2028 now projected at $290 billion, above the current backlog.
Looking ahead to the third quarter, Bank of America expects revenue of $108.8 billion and EPS of $3.03, close to Street estimates of $107.9 billion and $3.02.
Given accelerating AI demand, higher component pricing for items like memory, and Alphabet’s recent capital raise, Bank of America believes the company could raise its 2026 capex range by roughly 5% to $190 billion to $200 billion. The bank’s own capex estimate stands at $196 billion.
Potential catalysts cited include new AI-powered search ad formats, the rollout of agentic search features announced at I/O, a fall launch of Gemini 4, and possible details on external TPU monetization.
Risks flagged by the bank include tougher third-quarter comparisons, elevated valuation relative to history, OpenAI’s advertising ramp, and the flow of investment funds toward AI-focused IPOs.
https://ca.finance.yahoo.com/news/alphabet-could-crush-estimates-cloud-193300370.html
