Any time that you see spending that's a little less constructive than Meta that had pre-warned for two quarters... But having said that it's a front-footed spend. They're doing very well in search. The cloud business was expected to grow 38% and it grew 48%. That's a business that's going to be approaching levels of $100 billion of revenue in 2026. There's a digestion period around this spend and the implications in terms of free cash flow and DCF. But I think this is very positive for the AI ecosystem overall that this cycle is very much still intact.

You have two aspects of it. You have the infrastructure spend related to Google Cloud and the acceleration that that business is experiencing. And then you have the cost of delivering AI search throughout the business. Both are significant costs. The computational costs related to AI search are higher than legacy search, although these costs are coming down. The monetization of AI search is still lower than traditional search, but the company has said historically that they think ultimately will be higher. It's still very early days in terms of this improvement and growth in the Google Cloud business which very much justify the investment. You have to think about this as a cycle that's almost five to 10 years in building, relating to the CapEx spend, and the revenue streams are just starting to flow through. So again, I'd say it's a little bit of a net negative because the market has to process the implications of the incremental spend, but it's a very positive implication for Google as a company, and I think for the broader ecosystem.

You want to hear that what you're seeing in the reported results, which is that consumers are gravitating to where the investment is going. On the search side, you're seeing usage of the AI tools, and that's not only true for Google, but it's true across the entire AI complex from a consumer standpoint. The company needs to be spending behind that to be able to provide the services that consumers are demanding. On the cloud side, you can see it in Microsoft's results even though they weren't well received. That business is growing 40%. This business is growing almost 50%. Tomorrow night, Amazon is going to report a business that's on a run rate to do $150 billion of revenue that's growing up near the mid-20% range again. The spend and what you're going to hear is that this spend is very much justified. There are data points at least existing today that suggests that's very much the case today. The longevity of this cycle will remain debated in terms of how long that revenue acceleration for these companies lasts. But I think data points most recently for all the hyperscalers are very positive.

AWS is still the largest provider of cloud services. It's going to be north of $150 billion in revenue this year. Given its size and given the fact that it's been a little later to adapt to some of these AI features and functionality for customers, the growth rate has lagged. But they just launched project Ranir, which is also exclusively utilized by Anthropic, and that's going to drive pretty meaningful acceleration in that business in 2026. So I'd say AWS has been viewed as a laggard, but that narrative is in the process of shifting throughout this year. Having said that, I do think Azure and Google Cloud will continue to grow at very high rates as well.

They have a very strong relationship historically with Google Search integration into Apple. Whatever this AI cycle is going to be in terms of consumer engagement, it's likely to happen on an Apple device. The relationship with Gemini and the features and functionality that Apple can integrate into its platform because of that relationship just furthers an already strong relationship going back over many years that it's had with the search business. To hear Google talk about their product portfolio, whether it's the relationship with Apple or independent of that, I think is what you want to hear from the company tonight. It's how good their product is and how much better that it's getting relative to the legacy Blue Link search. I think we're starting to really start to see the benefits of that. In this past few weeks you've seen the infrastructure companies go down because there's questions about AI, and at the same time, all the software companies are going down because the AI is going to destroy their business model. It kind of seems like it can't be both at the same time. And I think now we're going to start to see that sorted out with results like those from Alphabet tonight and what we see from Amazon tomorrow.