Google Cloud grows 82%: Why Dan Niles bets on Alphabet and Meta

Dan Niles, founder of Niles Investment Management, reaffirmed his holding in Alphabet and Meta Platforms on October 5, 2026, in a CNBC interview. As a central reason for his Alphabet position, Niles cited Google Cloud's growth: the division generated $24.8 billion in revenue in the second quarter of 2026 – 82 percent more than in the prior-year period.

Google Cloud as growth driver

The figures that Alphabet released on July 22, 2026, for the second quarter show Google Cloud as the group's strongest growth driver. The division's revenue rose from $13.62 billion in the prior-year quarter to $24.77 billion – an increase of 82 percent. The backlog stood at $514 billion at the end of June, well $50 billion higher than a quarter earlier.

Profitability developed even more impressively: Google Cloud's operating income climbed from $2.83 billion in the prior-year quarter to $8.81 billion. The operating margin reached 35.6% – evidence that the cloud division is not only growing rapidly but also becoming significantly more efficient.

Strategic importance for Alphabet's AI infrastructure

Google Cloud is thus the most visible proof that Alphabet's investments in AI infrastructure are paying off. Analysts view the 82 percent growth rate as justifying the group's high capital expenditures.

Alphabet reported total revenue of $119.8 billion for the second quarter of 2026, an increase of 24 percent year-over-year – according to the group, the twelfth consecutive quarter with double-digit growth. Beyond Google Cloud, other business segments contribute to this: the Gemini app reached 950 million monthly users, and YouTube generated more than $60 billion in combined advertising and subscription revenue for the full year 2025.

Analyst ratings and price targets

On October 6, 2026, 24/7 Wall St. set a price target of $434.48 for Alphabet shares; at the then-closing price of $340.35, this corresponded to upside potential of 27.7 percent. At the end of September, the same firm had calculated $559 and derived upside potential of roughly 63 to 64 percent – this price target has since been significantly lowered.

With the quarterly results, Alphabet raised its forecast for 2026 investments to $195 to $205 billion, up from the previous $180 to $190 billion; for 2027, the group signaled a further significant increase. This initially pressured the stock after the earnings release on July 22, 2026. However, analysts argue that the investments are justified by Google Cloud's growth momentum.

Why Niles also bets on Meta

Niles' investment thesis for Meta Platforms is also tied to AI capabilities. Meta's AI agent Muse, launched on September 8, 2026, rose to the top of US download charts in the App Store that same month, temporarily displacing ChatGPT. After the Meta stock price increase, Niles did restrict his comment, noting that he now likes the stock less than he did in September.

The combination of strong cloud growth at Alphabet and AI application development at Meta forms the core of Niles' strategy. Both companies benefit from investments in artificial intelligence, though in different business models – Alphabet in infrastructure, Meta at the application layer. As a next step, Niles considers a cloud business of its own at Meta to be possible, through which the group could monetize its AI spending.

This article is a journalistic assessment and not investment advice.