Google Cloud up 82% to $24.77 billion as Meta spending pressures margins

The two companies reported second-quarter results a week apart, both spending record sums on AI data centers. The difference lies in what those dollars produced. At Alphabet, the spending surfaced as an 82% cloud surge, with nearly 90% of the Fortune 100 using Gemini Enterprise and Search growing 17% as AI features drove more queries. At Meta, the same effort surfaced as 14% more ad impressions and 12% higher ad prices, with the GEM ranking model lifting Facebook conversions 15.7%.

Zuckerberg framed Meta's effort to sell APIs, business agents, and compute to other companies as 'somewhat of a new muscle,' and said he expects 'a significantly higher margin on selling intelligence rather than selling compute directly.' That path is not yet proven. Meta is still 'demand constrained' for compute, according to CFO Susan Li, which underpins its $130 billion to $145 billion 2026 capex plan. More than 1 million businesses already use Meta's business agents every week.

Google is paying for its lead with borrowed money: long-term debt rose from $46.5 billion to $98.2 billion and buybacks are on hold. The test for Alphabet is whether cloud growth can exceed interest expense, which rose nearly 5x. For Meta, the test is whether the agent vision translates into enterprise revenue, which the author wants to see come in before leaning that way. Both stories now hinge on whether the returns arrive on schedule.