Alphabet's (GOOGL) Google is looking to live up to its name of cosmic scale as the company is set to test its artificial intelligence (AI) chips in low Earth orbit. As part of its ambitious Project Suncatcher, the company's in-house Trillium Tensor Processing Unit (TPU) chips will be transported in SpaceX's (SPCX) Transporter-18. Planet, an Earth-imaging and aerospace company known for operating large constellations of Earth-observation satellites, will also be partnering with Google on this mission.
Like SpaceX, Google is looking to build AI infrastructure in space and has plans to eventually put scores of its TPUs there. However, this recent news has not been enough to jolt GOOGL stock to life just yet. The stock remains up 9% on a year-to-date (YTD) basis, underperforming the S&P 500's ($SPX) rise of 12%.
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Google's TPU business is gaining momentum, with partners like Anthropic and Apple (AAPL) headlining the customer base. Notably, as revealed by CFO Anat Ashkenazi, the second quarter of fiscal 2026 was the first period wherein the company recognized revenue from its TPU sales, as Google Cloud's order backlog surged to $514 billion in Q2 2026 from $106 billion in Q2 2025.
Morgan Stanley seems to share in the TPU bullishness. The firm expects Google to sell 1 million TPUs, with 3.2 GW deployed in 2027 and and 4.2 GW deployed 2028. That implies revenue of $84 billion in 2027 and $108 billion in 2028.
If one bullish forecast from a Wall Street major was unconvincing, there's another endorsement to note. Crux AI — a dedicated, specialized AI cloud venture formed as a strategic partnership between Google and Blackstone (BX) — is designed to build massive, specialized infrastructure to meet the exploding demand for AI computing capacity. Blackstone has committed an initial $5 billion in equity to Crux, while a syndicate of major global banks — including Goldman Sachs, Barclays, BNP Paribas, and Sumitomo Mitsui — has lined up a massive $22 billion debt financing package.
The capital is being deployed to purchase Google’s proprietary TPUs and software services to power large-scale data-center builds. Crux AI plans to bring its first 500 megawatts of dedicated AI data-center capacity online by 2027. Notably, with Crux AI, hyperscalers and developers can gain access to a Google-powered hardware stack explicitly optimized for the massive reasoning and inference workloads of the next AI wave.
Finally, Google's next-generation silicon is shifting aggressively toward a specialized, inference-first design philosophy. Ironwood (TPU v7) introduces native FP8 hardware support alongside a massive upgrade to 192GB of HBM3E memory per chip, delivering a 10 times peak performance jump over earlier generations like the v5p while drastically accelerating throughput for massive multimodal models. Looking ahead to the v8 generation, designs like the TPU 8i also push further into low-precision FP4 capabilities to maximize computational density.
Alphabet Reports Q2 Earnings
Alphabet's Q2 2026 report was a hit, despite a slight earnings miss. Revenue rose 24% year-over-year (YOY) to $119.8 billion, marking the company's 12th-straight quarter of double-digit growth. Increasingly becoming the most vital segment of the business, Google Cloud saw revenue increase 82% YOY to $24.8 billion, also coming in ahead of the consensus estimate of roughly $22.3 billion. The traditional advertising business, however, continues to be the biggest revenue segment for the company. Advertising revenue climbed 14% YOY to $81.6 billion in Q2.
Adjusted EPS of $2.85 may have missed estimates, yet diluted EPS came in at $9.11, marking sizable 294% YOY growth. However, of this $9.11 per share, about $6.26 of the impact was from unrealized investment gains on equity securities.
Coming to cash flows for the quarter, the same remained solid as usual. Net cash from operating activities came in at $39.1 billion, up from $27.7 billion in the year-ago period. Overall, Alphabet ended Q2 with a cash balance of $55.9 billion. However, free cash flow was negative at -$5.9 billion. As capex intensity remains high, this could be concerning if not managed properly. Alphabet expended a massive $45 billion in capex during the period versus about $24 billion in capex in the prior-year period.
As for the valuation, in absolute terms, Alphabet stock looks reasonable. However, the valuation does seem a bit punchy when compared to the sector. GOOGL stock trades at forward price-to-earnings (P/E) ratio of 16.7 times, a price-to-sales (P/S) ratio of 10.4 times, and a price-to-cash flow (P/CF) ratio of 27 times, all of which come in above the respective sector medians.
What Do Analysts Think of Alphabet Stock?
Analysts remain gung ho on GOOGL stock. Overall, Alphabet has a consensus “Strong Buy” rating on Wall Street. Out of 53 analysts covering the stock, 46 have a “Strong Buy” rating, three have a “Moderate Buy” rating, and four have a “Hold” rating.
The mean target price of $432.49 indicates potential upside of 27% from current levels. Meanwhile, the high price target of $515 suggests the stock could climb as much as 51% from here.
www.barchart.com On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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