Alphabet Q2 results: Key takeaways for TCS, Infosys, Wipro, HCL Tech and TechM

Alphabet, Google's parent company, reported a solid Cloud growth in the June quarter, which bodes well for Indian IT companies such as Infosys Ltd, Tata Consultancy Services Ltd (TCS), Wipro Ltd, HCL Technologies Ltd and Tech Mahindra Ltd, Nuvama Institutional Equities said on Thursday .   

Including Q2 results, this was the fourth quarter of strong growth in Cloud business by Alphabet, driven by AI demand, Nuvama said. This was reflected in its higher capex guidance, the domestic brokerage said adding that sustained growth demonstrates continued investment by the enterprise on strategic initiatives.

"While the near-term environment remains laden with uncertainty for Indian IT companies, growth in the cloud business for Alphabet and its peers bodes well for domestic such as IT firms from a medium to long-term perspective," Nuvama Institutional Equities said on Thursday. 

Alphabet’s Q2 revenue grew 23 per cent YoY in constant currency (CC) terms to $120 billion, surpassing the Street’s estimate of $117 billion. Its operating margin came in at 34 per cent, up 160 basis points YoY, though below the Street’s estimate of 40 per cent. 

"Google Cloud delivered another strong quarter with revenue shooting up +82 per cent YoY on the back of strong AI demand. Near-term margins are likely to remain under pressure due to higher AI investments, third-party capacity usage and FX headwinds," Nuvama said.

Alphabet's Q2 capex increased to $44.9 billion from $35.7 billion in Q1. The company management raised its FY26 capex guidance to $195-205 billion from $180-190 billion earlier and expects capex to further increase in FY27. 

Nuvama's Vibhor Singhal has a target of Rs 3,000 on TCS, Rs 1,650 on Infosys (ahead of Q1 results), Rs 210 on Wipro, Rs 1,300 on HCL Tech and Rs 1,800 on Tech Mahindra, as per Bloomberg. 

Nuvama noted that Google Services' revenue expanded 15 per cent YoY to $94.5 billion, driven by strong Search and Subscription growth. Advertising revenue expanded 14 per cent YoY, led by broad-based growth across verticals and World Cup related YouTube demand. 

"Search advertising rose 17 per cent YoY while YouTube ads grew 13 per cent YoY. Subscriptions revenue rose 15 per cent YoY, driven by YouTube Premium, Google One and AI plan adoption. All geographies continued their double-digit growth momentum with US (32.1 per cent YoY) leading the growth, followed by Other Americas (up 22.5 per cent YoY), APAC (up 17.2 per cent YoY) and EMEA (15 per cent YoY)," Nuvama said.