Here are the major developments around Alphabet Inc. ahead of its earnings release on 4 February 2026, focusing squarely on your questions about AI momentum, Google Cloud, and competitive pressures on margins. The consensus view heading into the print reflects strong fundamentals mixed with heightened expectations and execution risk. 

Can AI Momentum Meaningfully Reaccelerate Google Cloud Growth This Quarter?

Yes — but with important caveats.

• AI-driven demand is supporting robust Google Cloud expansion.

Consensus estimates before the earnings release project ~34 – 36 per cent year-on-year Cloud revenue growth in Q4, with approximately $16 billion in sales, signalling continued acceleration. This is notable given the hyper-competitive landscape against AWS and Azure. 

• Cloud backlog remains exceptional.

A reported $155 billion backlog, gained from enterprise customers demanding AI-enabled services, provides multiyear revenue visibility and suggests that growth is not purely cyclical but structural. 

• Margin expansion trends are encouraging.

Cloud operating margins have been improving in recent quarters, indicating better unit economics in enterprise software and infrastructure offerings as AI products find paying customers. 

Risks to reacceleration in the near term:

The biggest challenge is whether this cloud momentum translates into sustainable profitability and operating leverage in the face of ongoing heavy investment in infrastructure and AI development. Capital expenditure remains elevated, and investors are closely watching whether that investment is beginning to pay off in measurable margin gains. 

Bottom line: AI demand is a credible driver of reacceleration in Cloud growth this quarter, but the strength of that acceleration will be judged less by headline growth and more by how efficiently Google converts demand into profitable growth.

Will AI-Driven Cloud Growth Be Strong Enough to Justify Alphabet’s Recent Re-Rating?

Possibly, but execution and expectations matter.

• Valuation reflects a forward-looking AI growth narrative.

Alphabet’s market cap climbing above $4 trillion rests on the expectation that AI innovations (Gemini and related services) will meaningfully diversify revenue and monetisation beyond historic advertising strength. 

• Cloud’s contribution to total growth is expanding.

Despite still being smaller than Search and advertising, Cloud’s rapid growth is helping reshape the revenue mix. Robust enterprise uptake of AI-integrated services underpins confidence that Cloud can justify a higher multiple over time, provided profits also scale. 

• Stock performance has outpaced fundamentals.

Strong advance into generative AI and partnerships (including a reported integration with Apple’s Siri and the expansion of AI capabilities) support the narrative, but the bar is high. Markets have priced in expectations that Cloud growth will continue accelerating meaningfully beyond current levels. 

Sceptical views highlight valuation risk if cloud growth slips even modestly or margins fail to expand meaningfully. Investors will be watching commentary on guidance and the company’s long-term strategy for Cloud monetisation.

Can Gemini Upgrades Defend Search Margins Amid Rising Competition?

Gemini and AI enhancements are core to Alphabet’s defensive strategy, but they are not a guaranteed shield on their own.

• AI-enhanced search features are driving engagement and monetisation opportunities.

New generative experiences within search appear to bolster query volumes and potentially advertising yield, which is critical since search still accounts for the majority of Alphabet’s revenue. 

• Gemini is being embedded more broadly across Google services.

Product upgrades in Gemini, especially the latest versions, underpin greater user engagement and richer ad placements, which help defend margins against competitors. However, capital intensity is high, and the company must ensure that increased AI costs do not erode the very margins it seeks to protect. 

• Competition remains strong.

AI rivals such as OpenAI, Microsoft and others are also integrating generative capabilities into search-like experiences and cloud offerings. Alphabet’s edge is its massive scale and integration across ad ecosystems, but maintaining that advantage will require continuous innovation and disciplined monetisation. 

Summary View

Reacceleration of Cloud growth this quarter is plausible and supported by strong enterprise demand and backlog expansion. The question is less about whether AI will grow Cloud revenue and more about how efficiently Alphabet can convert that growth into margins and profits.

The valuation re-rating reflects a belief that AI will reshape Alphabet’s revenue mix. The earnings print and guidance will be critical in validating that belief in the near term. If Cloud growth accelerates while margins hold or expand, it would support the new valuation regime. If not, the market may reassess.

Gemini upgrades help defend Search margins by enhancing engagement and ad monetisation, but competitive pressures and cost intensity mean that this defence depends on execution rather than product branding alone.