Google's quarter was top-line excellent — $119B revenue, up 24%, with Google Cloud accelerating to 82% growth — but the stock sold off because investors worry whether the ~$200B AI capex bet will yield returns and why Gemini lags rivals; the angst is really about AI capex returns, not the quarter itself.

Harry walks through Google's Q2: revenue of $119B (+24%), cloud accelerating to 82% growth, but negative free cash flow for the first time. He argues the market's weak reaction is really about two things — whether the capex spend will yield a return and analysts pushing on why Gemini isn't as good as the rivals — i.e., nerves about the ~$200B AI bet, not the top line. ✦ AI generated

Harry · 20VC · 2026-07-30 · original ↗

Top line was great. 119 billion Q2 revenue up 24%. Uh, pass consensus of 116. Uh, Google Cloud accelerating 82% as I said and it did not come out well. The reception was not great. How did we think about this guys? You can't get lost on the day. I mean, it's still like, you know, year to date, it's still up 6%, Microsoft's down 17, right? Nvidia's only up 5.9. So, I think getting lost in the the details of the day's response, it was a mediocre response and they agree. And I think it was two things for what it's worth. One is it's capex spend and is it going to yield a return and then secondly, which was more intangible and you can't prove why stocks go up and down, they just move. But the other thing was analysts pushing a little bit on hey basically why isn't Gemini as good as the other guys right and you know and on the first it kind of been a surprise that they're going free cash flow negative cuz you can predict the cash flow you can predict the spend and it's like duh this is knowable and you're seeing it in a bunch of different places people are just getting mildly scared about the bet and that's not to say they're right or wrong you know um maybe this 200 billion will have an amazing return. And the ROI, the bulls would say it correctly, the ROI on capex just to be a neocloud hyperscaler, forget owning a model, just the business of renting compute to open AAI entropic and space and and open AAI entropic from has been a great business. So therefore, it will continue to be a great business and it is factually accurate to say it's been a great business. The ROI has been I mean Elon is making out like a bandit on his, you know, gas turbines in Memphis or whatever it is that we're closing our regulatory eyes to, right? The question they're asking is if you spend 200 billion, will that have a good return in two or three years time? So that's there's angst around that which is really just a derivative of saying I'm angsty around Google sorry around open AI and shopping.

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