Google will be the first to unveil the earnings reports of the seven tech giants, with new AI chips and AI investments being the main highlights

Alphabet will release its quarterly earnings report after the U.S. stock market closes on Wednesday, July 22, officially kicking off the second quarter earnings season for the "Big Seven Tech Giants" in the U.S. stock market.

As the first mega-cap tech company to disclose its performance, Alphabet's earnings report will not only set the overall tone for the tech sector but also influence the broader market trend. In the coming weeks, Microsoft, Meta, Amazon, Apple, and NVIDIA will successively announce their earnings, with the market using Google's performance as an important reference.

Artificial intelligence remains the number one investment theme on Wall Street. Even if Google's revenue is likely to continue double-digit growth this quarter, investors will not only focus on revenue data but will also assess whether the company's massive infrastructure investments can deliver substantial returns.

Market Expectations for Alphabet's Q2 Performance Remain High

Wall Street is generally optimistic about Google's upcoming earnings report: the market consensus expects that, after accounting for traffic acquisition costs (TAC, the fees Google pays to partners to drive traffic to its search and advertising businesses), the company's total revenue could reach $101.22 billion, with earnings per share of approximately $2.90.

Both core indicators, revenue and net profit, are expected to grow year-on-year by about 24%.

Whether Google can exceed market expectations largely depends on the following key business segments and operational indicators:

1. Google Search Advertising Revenue
2. YouTube Advertising Revenue
3. Google Cloud Business Growth Rate
4. Operating Profit Margin Level
5. Capital Expenditures Related to Artificial Intelligence

Cloud computing remains one of Google's fastest-growing business segments, with the market expecting strong demand for AI computing infrastructure and enterprise cloud services to continue. Estimates indicate that Google Cloud's Q2 revenue is expected to soar 67% from $13.62 billion in the same period last year to $22.79 billion.

At the same time, investors will closely observe whether the Gemini large model can empower the search business, integrate Google's entire product ecosystem, and enhance overall commercialization capabilities.

Zacks Earnings Surprise Prediction (ESP) Releases Optimistic Signals

The most critical basis for the market's bullish outlook on Google comes from Zacks' Earnings Surprise Prediction model (ESP): data shows that Google is likely to exceed profit expectations once again.

The latest and most accurate earnings estimate from Wall Street analysts is $2.93 per share, nearly 2% higher than Zacks' market consensus estimate of $2.87.

Google has outperformed market expectations for earnings for 13 consecutive quarters; over the past four quarters, the average earnings per share exceeded expectations by as much as 34.43%.

New Chip Frozen v2 Becomes a Short-Term Catalyst for Stock Price

Recent reports indicate that Google is developing a new generation of AI server chips, codenamed Frozen v2. This chip can directly embed parts of the Gemini model architecture into silicon-based hardware, significantly improving the operational efficiency of large models. Following this news, Alphabet's stock price continued to rise during Monday's trading session In short, Frozen v2 is Google's bold layout towards dedicated AI hardware for large models, aiming to make various AI services based on Gemini faster, cheaper, and scalable; however, the cost is a decrease in chip versatility and flexibility in adapting to large models.

The massive investment in AI remains the market's biggest concern

Compared to the numbers on the financial statements, investors pay more attention to management's outlook on future AI capital expenditures.

Over the past year, Google has significantly increased capital expenditures, racing with Microsoft, Amazon, and Meta to build AI infrastructure. As long as revenue and profits maintain steady growth, the market can still accept high investments; however, if the return on AI investments shows signs of decline, the company's stock price will come under pressure.

Conversely, if Google Cloud's growth exceeds expectations and the commercialization of Gemini progresses positively, it will further solidify the AI bull market logic that has supported tech stocks since 2026.

In the first quarter, Google's capital expenditures surged 107% year-on-year, reaching $35.7 billion, with the vast majority of funds directed towards AI computing infrastructure construction.

The company has provided a full-year capital expenditure guidance range for fiscal year 2026 of $175 billion to $185 billion, primarily for expanding data centers, building AI computing clusters, purchasing servers and networking equipment, and iterating self-developed TPU chips to meet the growing demand from Google Cloud and Gemini large models.

Investors will closely monitor whether the company adjusts its full-year expenditure guidance and management's explanation of whether the large investments continue to drive cloud business growth and whether there has been any improvement in AI monetization efficiency.

Valuation levels still offer value for money

Despite a significant rise in stock prices over the past year, Alphabet's current valuation remains moderate compared to the other six major tech giants.

The company's forward price-to-earnings ratio is 24 times, close to the average valuation of the S&P 500 index; at the same time, among the seven major tech giants, Google has three advantages: strong profit growth, ample free cash flow, and a solid balance sheet.

A moderate valuation means that even if performance only meets expectations or slightly falls short, there is limited downside potential for the stock price; if earnings guidance is raised, there is still ample room for the stock price to rise.

In this earnings season among the seven major tech giants, Google was the first to release its earnings report, with the importance of its earnings conference call being equal to that of its financial data.

If the second-quarter performance is impressive and management expresses a positive outlook, it will boost market confidence and pave the way for subsequent earnings reports from Microsoft, Meta, Amazon, and NVIDIA; conversely, a conservative or pessimistic business outlook will weigh on the overall market sentiment in the tech sector