JPMorgan: 82% Cloud Business Growth Proves AI Spending Pays Off, Buy the Dip

According to TechFlow Research, Google's Q2 earnings confirm that AI monetization is accelerating. Cloud business revenue grew 82% year-over-year to $24.77 billion, marking continuous acceleration; TPU contributed over $1 billion in revenue independently for the first time, and order backlog increased by $52 billion quarter-over-quarter to $514 billion, indicating that AI compute demand is far from saturated. Search business grew 17% year-over-year, and AI model monthly active users exceeded 1 billion. 2026 capital expenditure was raised to $195-205 billion. JPMorgan believes this reflects compute demand exceeding supply rather than cost pressure, and it will continue to grow in 2027. Maintaining an Overweight rating with a target price of $420, representing approximately 34% upside from the current stock price. Profit margin pressure stems from transitional factors such as third-party capacity bridging and TPU hardware sales, not structural deterioration. JPMorgan believes AI investments have begun to yield returns and recommends buying the dip.