has been shipping their AI products with accelerated speed taking control of the narrative over their search disruption and turning it on it’s head. You can see the level of their innovation with the timeline from Nov 2025 to May 2026 updating several models and products within that time frame.

Also let’s look at their amazing earnings highlights. Most notably from the graphic below is that Google Cloud rose 82% Y/Y with a backlog of $514 B. This is phenomenal growth from this division and the other results were also great.

But why did the stock go down initially after the earnings?

The reason is AI capex. This narrative has clouded the hyperscalers to no end recently and it’s clear why. A lot of these companies are getting to a point of negative free cash flow and debt to pay for their AI capex obligations. This directly affects the value of shareholders and they don’t seem to like it.

Let’s take another look at their valuation after this earnings report. I calculated an intrinsic value of $362.27 per share last time around the Q1 ‘26 earnings using my google sheet template.

However, I have started using a more comprehensive look at valuation using Stock Analysis going forward.

A sidebar here: if you are a serious investor or thinking about becoming a serious investor, use Stock Analysis to analyze stocks. It’s much easier than writing your own DCF tables and performing a cash flow analysis. You can get a discount using code ‘BEARD’ at this link: https://stockanalysis.com/pro/?ref=beardedinvestor.

So using Stock Analysis, I pulled up the forecast and valuation of based on the number of analysts covering the stock. Check it out here, but let’s go through the data.

Stock Analysis first gives you a clear indication whether the stock is a buy or not with a price target and an analyst consensus buy rating. Here we can see that is considered a Strong Buy.

In addition, there is a 12 month forecast that is more useful than a 10 year projection for all practical matters. If the 12 month projection does not look good AND the fundamentals are weak or non-existent, I wouldn’t buy and hold the company for 10+ years anyways.

Another highly useful feature on Stock Analysis is the recommendation trends to see where analysts fall on the spectrum of Strong Buy all the way to Strong Sell ratings. This gives weight to the analyst ratings. You can then see which rating the majority of analysts (who have the means and research data to run these advanced DCF models) are leaning towards.

Analyst rating upgrades and downgrades are also super important to see the latest information and news about a particular stock. seem to be having upward revisions after their earnings report.

The financial forecast is also super important as it can tell you whether a business is going to experience a slowdown that we as retail investors may not be able to see or forecast. seems to be indicating an EPS decrease next year possibly due to the high capex they are projecting. Even so, their other metrics like revenue look like they are trending up.

The most important table that I look at this forecast table. It shows the projected numbers for future years. is showing good revenue growth numbers, maintaining gross margin, but will have an issue with their EPS growth rates in 2027. Free cash flow looks bad in 2027 as well with a recovery in 2028. This can be useful to determine when a great investment can be bought at a good price.

Not financial advice. Please do your own due diligence when investing your own money.

Now, did report zero AI capex spend or something drastically different than other mega cap tech names? Not at all. But the difference is how they have locked in massive future revenues through customer commitments, have a high-growth cloud business to absorb AI capex, and the ability to deliver actual revenue from that capex through advertising and selling that compute to customers.

Let’s first look at their earnings results from this past quarter. I have shared quick earnings results on my social platforms (definitely follow my social accounts to get the latest information very quickly), but here they are once more so we can have them as a reference.

For this analysis, I used an un-levered beta of 1.55 (software internet industry) which was re-levered to 1.37 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 17.61%, and a risk free rate of 3.76%.

Please refer to Stock Analysis for all the data I used in this analysis.

Read more

For this analysis, I used an un-levered beta of 1.23 (internet application and software industry) which was re-levered to 1.18 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 14.5% based on CFO commentary, and a risk free rate of 3.76%.

Please refer to Stock Analysis for all the data I used in this analysis.

I used the long dated bond rate for which is 4.875% for the pre-tax cost of debt as of the writing of this analysis. Now with those parameters out of the way, here is the company guidance.

They are guiding for a second quarter revenue of $59.5 billion (midpoint) which is only slightly above analyst expectations and largely inline. Total expenses remain unchanged which is telling because that indicates that the increase in capex is largely due to component pricing increases rather than spending more to acquire more compute.

Even so, $125-$145 billion is a large amount of capex for internal use AI that is not directly sold to customers and consumers. For that reason, the stock is getting hammered post earnings. In addition, looking at the DAP (daily active people) metric, which is arguably the most important metric for as they require people to view and click on ads which fund their advertising business, it’s clear that there were extenuating circumstances.

Read more

For this analysis, I used an un-levered beta of 1.23 (internet application and software industry) which was re-levered to 1.16 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 26.15%, and a risk free rate of 3.76%.

Since the interest expenses are not available for on Stock Analysis, I used the 2030 bond rate for which is 4.73% as of the writing of this analysis. Now with those parameters out of the way, here is the company guidance.

As you can see for their FY 26 guidance, management describes full year guidance for subscription revenues only not the professional/other revenues. Based on this, I used a 22.25% revenue growth rate for both subscription and other revenues as an approximation for Year 1.

Read more

For this analysis, I used an un-levered beta of 0.77 (consumer services industry) which was re-levered to 0.85 using the Hamada equation. In addition, I also used an ERP of 4.5% (for US equities), an effective tax rate of 6.00%, and a risk free rate of 3.76%.

Since the interest expenses are not available for on Stock Analysis and does not have 10 year bond rates, I searched for analyst’s estimates for the pre-tax cost of debt which is ~7.2% as of now. Now with those parameters out of the way, here is some information from the company’s investor presentations and earnings.

For their 2026 guidance, management describes several ranges for key metrics and I use the midpoint of those just like the other analysis I have done. Based on this, I used a 16.5% revenue growth rate and a 10.08% operating margin for Year 1.

Read more

Since the interest expenses are not available for on Stock Analysis, I used the 10-year (2036) Salesforce bond maturity rate for the pre-tax cost of debt which is 5.55%. Now with those parameters out of the way, here is some information from the company’s investor presentations and earnings around FY 27 guidance.

In their FY ‘27 (2026) guidance, management describes several ranges for key metrics and I use the midpoint of those just like the other analysis I have done. Based on this, I used a 10.5% revenue growth rate and a 20.9% operating margin for Year 1.

Read more

management put out guidance for Year 1 financials (2026), in their February update for Q4 2025 and full year 2025 results presentation.

In this 2026 guidance, they offer ranges of values for several key metrics of which I use the midpoint in the subsequent calculations. Using these numbers, I derive a revenue of ~$1.69 billion, operating margin of ~2.37%, and capex (sustaining and project capex) of ~$172.5 million.

Read more

I used an un-levered beta of 1.23 based on Aswath Damodaran’s work for a software application/service company industry. This beta was re-levered to 1.18 using the Hamadi equation.

Effective tax rates, pre-tax cost of debt and base year drivers were all calculated using TTM or most current data pulled from stockanalysis.com.

The ERP or equity risk premium was 4.5 for equities centered in the US. Base year revenue growth was calculated with the TTM financials and came in at 10.96% growth. Let’s look at how I structured stage 1 of the DCF projection:

Read more

A un-levered beta of 1.35 was used based on Aswath Damodaran’s work for semiconductor equipment providers. This beta was re-levered to 1.23 using the Hamadi equation. Effective tax rates, pre-tax cost of debt and base year drivers were all calculated using TTM or most current data.

Read more