# Google’s cloud growth offsets uncertainty in search

Markdown copy of https://realalpha.app/s/googles-cloud-growth-offsets-uncertainty-in-search/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [David Friedberg](https://realalpha.app/people/david-friedberg/) (Host) · CEO, Ohalo · Founded The Climate Corporation, sold to Monsanto for about $1.1B in 2013.
- Host: [Chamath Palihapitiya](https://realalpha.app/people/chamath-palihapitiya/) · Founder & CEO, Social Capital · Led Facebook's growth team; his firm backed Slack and AI chipmaker Groq.
- Host: [Jason Calacanis](https://realalpha.app/people/jason-calacanis/) · Founder & CEO, LAUNCH · Early Uber angel; sold Weblogs Inc. to AOL; hosts This Week in Startups.
- Host: [David Sacks](https://realalpha.app/people/david-sacks/) · Co-founder & partner, Craft Ventures · PayPal's first COO, founded Yammer; White House AI & crypto czar 2025–26.
- Show: All-In
- Episode: [Anthropic S-1 Shocker, Greatest Business Ever? Google’s $500B Wipeout, Midterm Predictions](https://realalpha.app/v/p1Dy4e4ff0s/), Oct 30, 2026
- Moment: 1:03:31 to 1:07:36 of the episode (4 min), playing on https://realalpha.app/s/googles-cloud-growth-offsets-uncertainty-in-search/; the episode from there: https://realalpha.app/v/p1Dy4e4ff0s/?t=3811

## Quote

> “That's the thing I think everyone needs to be watching is what is the **AI replacement look like** on the consumer side for Google's core business”
> — [David Friedberg](https://realalpha.app/people/david-friedberg/) at [1:05:13](https://realalpha.app/v/p1Dy4e4ff0s/?t=3913) · All-In

## Takeaways

1. Google Cloud has become a substantial source of operating income.
2. Search revenue is growing, but its future growth is uncertain.
3. Watch whether consumer AI can replace search-ad revenue.

## About this segment

David Friedberg sees strong growth potential in Google Cloud but uncertainty around search advertising. The key question is whether consumer AI can generate revenue fast enough to replace any decline in search.

From “Anthropic S-1 Shocker, Greatest Business Ever? Google’s $500B Wipeout, Midterm Predictions”, Oct 30, 2026. [Watch the full episode](https://realalpha.app/v/p1Dy4e4ff0s/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[1:03:34](https://realalpha.app/v/p1Dy4e4ff0s/?t=3814) services, the core Google ad revenue is a real challenge right now in terms of can they keep the momentum up. Overall, the business trades at roughly 21 times operating income. And you get that sort of a multiple based on reliability of future cash flows and, and effectively growth of those cash flows. I think the Google Cloud business is looking, you know, really tremendous. I mean, I don't know if you guys remember, it wasn't too long ago, and this thing was not making money. Last year, the Google Cloud business for this quarter was generating $3.5 billion of operating income. This quarter, it's over $11 billion of operating income. And this is a lot like the SpaceXAI story, where the value of the compute infrastructure that's been built is just tremendous. The question is, does Google actually have the models that sit on top of it? And in many cases, they do is they can make a

[1:04:29](https://realalpha.app/v/p1Dy4e4ff0s/?t=3869) higher margin on that piece of the stack. So when I say it's complicated, I think there's a story you can build in the cloud business that shows the next couple of years of really progressive growth in that business. The core Google services, I think, is when it becomes challenging, where over the last year, it grew from 33.5 to 39. And as some people have pointed out, this may largely be driven by a change in the pricing algorithm for ads, and how Google is now, in some cases, over earning for those, for those clicks. And over time, advertisers will see that they'll experience that they'll reduce spend, they'll attract some dollars, and it won't look as good of a business. So the question then is, do they have a consumer AI business that catches up and accelerates to support that? That's the thing I think everyone needs to be watching is what is

[1:05:20](https://realalpha.app/v/p1Dy4e4ff0s/?t=3920) the AI replacement look like on the consumer side for Google's core business, the core cost per click advertising network and you type a search into Google. That's the core business you're talking to. That's the core consumer business. So the question is, is there a consumer AI alternative that starts to generate meaningful revenue to replace that revenue? And what does the revenue ramp look like there relative to the flattening or decline that may arise in core search? And how quickly does that happen? That is a dynamic and challenging question to answer now. Internally, I think there's a bit of turmoil.

[1:05:55](https://realalpha.app/v/p1Dy4e4ff0s/?t=3955) there is a bit of like, what are we not just overall as a company, but just even within the business segments? What is Google search? Is it AI? Is it search? What is Google cloud? Is it the models? Or is it just the compute, the rental of the compute? And I think we saw this battle play out recently where Jeff Dean and others left Google. And I don't know this for sure. But the theory is that the computer scientists that have been building models at Google, maybe aren't getting the resources that they had hoped to get, because Google can make so much more money renting that compute out to others. And so it's a really hard question of what do we want to be at Google right now. And I don't think that they have a great answer. And I don't think it came across well in the it didn't come across well, obviously, and people reacted to them. But they

[1:06:44](https://realalpha.app/v/p1Dy4e4ff0s/?t=4004) did know this was coming. They did plan for it. They renamed the company Alphabet. And they said they've got this great cfo let's make all these other bets fend for themselves the way most of the world have to make their way in the world raise outside capital so they they did prepare for this in fairness to the team over there youtube surging android surging you know google cloud surging and then you have the the franchise slowing uh searches up but revenue growth slightly down so do you think they can fix this or should they just do a bending spoons and get as much money as possible out of the search and put it into other things like consumer ai corporate ai and their future models and hosting of other people's models what are your thoughts here i don't think that's what bending spoons does and not everything is an analogy to bending spoons