Morgan Stanley sees Google Cloud flipping from a side project into Alphabet's profit engine over the next four years.
The math is striking: Cloud operating income forecast to jump from ~$1.9B in 2023 (2% of total EBIT) to $136.6B by 2028—nearly half of company-wide profit. The ramp is steep: $6.1B in '24, $13.6B in '25, $36.4B in '26, $86.5B in '27, then $136.6B in '28.
The driver? Custom TPUs. Purpose-built silicon for training and inference gives $GOOGL a differentiated edge when GPU capacity is the bottleneck. Enterprises and AI labs are scrambling for compute—Google controls its own stack.
If this plays out, Alphabet stops being an ads company with a cloud side hustle and becomes a diversified infrastructure play. The profit mix is already shifting. Cloud margin expansion at scale could be the real story here, not just revenue growth.
Watch the capex cycle, the TPU roadmap, and whether hyperscaler competition (AWS, Azure) can match Google's vertical integration. If Morgan Stanley is even half right, this is a meaningful re-rating catalyst over the next 18–24 months.
The math is striking: Cloud operating income forecast to jump from ~$1.9B in 2023 (2% of total EBIT) to $136.6B by 2028—nearly half of company-wide profit. The ramp is steep: $6.1B in '24, $13.6B in '25, $36.4B in '26, $86.5B in '27, then $136.6B in '28.
The driver? Custom TPUs. Purpose-built silicon for training and inference gives $GOOGL a differentiated edge when GPU capacity is the bottleneck. Enterprises and AI labs are scrambling for compute—Google controls its own stack.
If this plays out, Alphabet stops being an ads company with a cloud side hustle and becomes a diversified infrastructure play. The profit mix is already shifting. Cloud margin expansion at scale could be the real story here, not just revenue growth.
Watch the capex cycle, the TPU roadmap, and whether hyperscaler competition (AWS, Azure) can match Google's vertical integration. If Morgan Stanley is even half right, this is a meaningful re-rating catalyst over the next 18–24 months.