Google’s Cloud and Search revenue blew past expectations. Total revenue was up 18% year-over-year, compared to expectations of 15%.

Google Cloud growth of 48% y/y was ahead of the Street in-print expectation of 34% and the whisper of 38%. Printing 48% growth is not just a beat; it’s a statement—especially in the context of Azure up 39% and AWS, which will likely be up 22-25%. Against that backdrop, Cloud growth stands out as the quarter’s most important data point.

Search also posted upside, growing 17% year-over-year. The in-print number referenced was 13.5%, with a whisper around 15%.

YouTube was the one softer-looking line at 9% growth, but that segment faced a tough comp with last year’s election spend. I expect YouTube growth to reaccelerate in the March quarter as comps normalize.

There is a disconnect between Google’s outlook and how shares of $GOOG traded in after-hours. About five minutes into the call, shares peaked up about 4.5% before reversing and ending down about 1.5%.

I went back and found two inflection points on the call that help explain the move.

The first leg down followed Sundar’s commentary on calendar 2026 capex. If the company hits the top end of its guidance, capex would be up about 108% y/y. Heading into the quarter, the Street had been modeling something closer to 30% growth. That step change in spending came as a shock and triggered a pullback.

The second leg lower came during CFO Anat Ashkenazi’s outlook commentary. She highlighted that depreciation will have a significant impact in the near term, with March depreciation expected to grow around 40% y/y, versus revenue growth expectations of roughly 15% to 18%. While largely an accounting and timing issue, this implies near-term earnings estimates are likely to drift lower as models adjust.

A final layer was Cloud-related. Management reiterated confidence in robust cloud demand but flagged variability tied to supply constraints. Roughly half of the capex is expected to go toward Cloud, and that spend ramps through the year. For investors focused on quarterly cloud growth, the implication is that supply dynamics could introduce some variability to growth even as underlying demand remains strong.

The bottom line is that the after-hours move is noise and reflects capex magnitude, depreciation optics, and cloud supply timing rather than any signal of weakening fundamentals.

Google guided capex up 108% for 2026 at the high end ($185B) of the range. Previously, the Street had expected 30% growth this year from the $89B reported for 2025. That compares to Meta up 85% at the high end of its range, Microsoft at around 25%, and Amazon at up 18%.

At the risk of overstating the obvious, the guide tells us a lot about the future utility of AI. Google is seeing a tangible step-up in growth driven by AI, and its spending outlook underscores that the most competent AI companies in the world believe we are still early, and that massive spend will yield faster earnings growth long-term.

The key part of the Search discussion centered on the underlying engagement dynamics. For the third consecutive quarter, Sundar highlighted that users are increasingly interacting with Google products in ‘AI-native’ ways.

One metric that stood out: users engaging with AI Mode interact roughly 3x more than they do during traditional search queries. While management did not provide concrete data on the pace of ad integration within Overviews and AI Mode, this surging engagement serves as a strong leading indicator for long-term advertising yield.

On Gemini, management disclosed that monthly active users (MAUs) reached 750 million, up from 650 million three months ago. This puts Google within striking distance of OpenAI, with industry estimates pegging ChatGPT at roughly 900 million weekly active users. The gap has narrowed meaningfully over the past six months, suggesting that the launch of Gemini 3 is translating directly into adoption. Importantly, many users toggle between Gemini and GPT, meaning these user bases are not mutually exclusive, but the trend remains directionally positive for Google.

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