Google Cloud Growth Starts to Cool
Alphabet (GOOGL) reported at the end of July, and cloud revenue grew about 82% year over year - an acceleration. But consumer sentiment data now points to that pace flattening. On a 90-day moving average (a look back over the past quarter), demand runs up about 2% year over year. This is not a 1-to-1 predictor of revenue; it works better as a signal of speeding up or slowing down. On a 30-day moving average, the number slips, so the acceleration is starting to level out.
This is the one yellow flag in the data. Google Cloud growth has been strong across the last three quarters, so any slowdown matters. If the growth rate does not keep climbing at its recent pace, investors may not like what they see next quarter.
At the same time, Microsoft (MSFT) Azure popped - a bright acceleration on the 30-day moving average. Both Azure and Amazon (AMZN) Web Services are picking up steam, while Google Cloud's pace eases off. Google Cloud sits in third place among these rivals, so it may have more ground to make up, and its growth rate has still outpaced competitors.
Even with the cooling, this is leveling off from 82% growth, which stays strong.
Search and Advertising Still Carry the Company
Alphabet has 13 products with at least a billion users each. That huge base is what it advertises into, and advertising is still the biggest share of revenue. Google search rose 17% year over year last quarter - a segment AI was supposed to kill, and clearly has not.
YouTube is another major driver. Its live sports content protects it in streaming advertising and keeps pulling in viewers and advertiser money.
Overall demand across all Alphabet segments is up 4% year over year despite the company's massive size, and that demand still tracks ahead of the stock. Because earnings were so good, the stock may have run ahead of the data for now, but demand for both cloud products and advertising continues to do well. Long term, I would not bet against this company. Search and advertising look very healthy, and the other segments are outperforming, which makes the long-term case bullish.
Gemini's Rapid Adoption
Alphabet unveiled a new Gemini flash model for coding and agents. Investors had been waiting for an update to its frontier model, since Gemini has lagged as AI platforms compete. This release is not the high-end frontier model investors are still expecting, so there is plenty of room to improve.
Even so, Gemini growth is strong. It went from 400 million users to a billion users in about 15 months - rapid adoption, with large market share still ahead to take if Google executes. Forward-looking Gemini adoption in the data is up triple digits, more than doubling year over year, and that rate is holding. It remains a smaller slice of overall chatter compared with higher-end frontier models.
Will Gemini's niche be the casual home user rather than business-focused foundational models? Likely yes. The way people search has changed, and Google has kept its users instead of losing them to other large language models. Now you can type a question into the Google search bar the same way you would ask an AI, and Gemini answers directly - no scrolling, no clicking a link, no reading through pages. It aggregates the answer for you. That built-in summary is a major reason for its adoption and helps Google hold its search base against rivals like OpenAI's models and Anthropic's Claude.
