“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 SpaceX AI 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?”
All-In with Chamath, Jason, Sacks & Friedberg · Money & Markets · October 2026
Context
Jason Calacanis had just walked through Google's Q3 earnings, including the drop in the stock and slowing search growth, and asked Friedberg whether Google is a buy. Friedberg starts with the cloud business and then separates it from the more worrying core ad business.
Transcript
said. Yeah. So, yeah. I mean, I think they obviously believe it. And if you look at that chart I made with the other franchises, they obviously have an incredible franchise that's theirs to lose when we get the open
…What are your thoughts here? Are you worried about that franchise? Or do you think they've done a good enough job with the other businesses? Google Cloud and YouTube come to mind, Android, in terms of diversifying their revenue. You worried about Google as a buy opportunity or is this stay away?
…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 effectively growth of those cash flows. I think the Google Cloud business is looking really tremendous. I mean, I don't know if you guys remember, it wasn't too long ago when 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 SpaceX AI 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 so. They can make a 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 and a half to 39. And as…
The core cost-per-click advertising network new type of 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?…
It didn't come across well, obviously. Yeah. And people reacted, Shamath, but they 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 Waymos of the world have to make…
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