To The Moon

--Ad Resilience Remains, AI Transformation Takes a Test, Regulatory Shadow Remains

On July 23, $Alphabet(GOOGL)$ will announce Q2 earnings.The market generally expects its search advertising and YouTube business will continue to grow steadily, while the cloud computing to maintain the medium and high speed expansion, the market is mostly optimistic about its sound fundamentals.However, as the EU antitrust ruling approaches in August, the uncertainties facing Google cannot be ignored.Search and YouTube become core pillars as certainty of ad recovery grows. $Alphabet(GOOG)$

Advertising remains the ballast of Google's cash flow.Q2 advertising revenue is expected to reach $70.2B (+9% y/y), of which $53.2B (+10% y/y) is search advertising, exceeding market expectations by about 1%.Despite the flat quarter-over-quarter, the data is still solid under the influence of the lower base.YouTube, on the other hand, continues to attack the streaming market, and its TV streaming market share in the U.S. has reached 12.8%, surpassing the traditional hegemony of Netflix and others for the first time.The monetization ability of YouTube Shorts has improved significantly, and the Q2 ad performance is expected to be "Slightly higher than market consensus", and pointed out that there was a structural rebound in advertising budgets in May-June, with e-commerce, travel and pharmaceuticals being the highlights.

Cloud business continues to expand, but GPU bottleneck remains a disruptive factor

Google Cloud remains one of the medium to long-term growth engines.Q2 cloud revenue is expected to reach $13.1B (+27% YoY), in line with the seasonal performance in recent years, slightly lower ($12.7B).GPU supply bottleneck may render cloud growth volatile in H2.

Accelerating capex for cloud services remains a trend against the backdrop of rising demand for generative AI inference.Google continued to push forward with data center expansion in Q2, and 2026 Capex expectation was revised upward from $70B to $75B+.

GenAI Search Users Growing Rapidly, Commercial Realization Still in Early Days

Google's Gemini with AI Overviews continues to grow in acceptance on the user end.The survey found that 80% of U.S. users have tried GenAI search products, with 69% actively using them on a weekly basis.Especially in business intent search scenarios (e.g. "buy products", "book flights"), Google still maintains dominance.

At present, the commercialization of AI search advertising is still at an early stage, and has not yet formed an obvious drive for CPM or CTR, and the real ROAS improvement remains to be seen.This also means that whether AI can make up for or even surpass the traditional search profitability will be the focus of attention in the subsequent earnings report!

Regulatory pressure, valuation ceiling is hidden

Under the high expectations of the current round of earnings, Google's biggest variable may not be performance, but policy.The European Union is expected to make a final ruling on its Android distribution case in August, and if the 4.1 billion euro fine is upheld, it will strengthen its legal determination of "market dominance".Meanwhile, the UK's CMA is considering designating it as a "Strategic Market Participant (SMS)", which could force Google to open up its search and advertising data structures.

Current market price targets are mostly in the $20-240 range (based on 20x or so 2026E EPS), with the more cautious factor being that until the policy is clear, it will be difficult for Google shares to have a breakout performance at 18x-20x 2026E EPS.

Earnings report into the short-term showdown between the short and long term forces

From the market in recent days, Google's shares have rebounded more than 8% from their lows in late June, reflecting investors' advance layout of Q2 results.But compared with $Meta Platforms, Inc.(META)$ and $Amazon.com(AMZN)$ its rise is relatively restrained, also indicates that the market is waiting for a more convincing catalyst.In the short term, if the Q2 earnings report can significantly exceed expectations and release specific signals of AI commercialization, it will form momentum for the breakthrough of $ 200; on the contrary, if the regulation or AI conversion rate is lower than expected, the stock may face a brief pullback.

Google's Q2 earnings report is likely to bring a "more than expected but not surprise" performance, especially in the context of advertising and YouTube performance is solid, Cloud growth is healthy.However, the market is still waiting for stronger signals on its AI liquidity, while the risk of regulatory policy may become a key variable in determining the valuation range after August.

For long-term investors, Google is still a technology stock in the fundamentals of high-quality assets; for short-term traders, the release of the earnings report may be just "buy expectations, sell reality" of a battle.