Cathie Wood’s Last-Minute Bet on Alphabet Puts Cloud Margins Under the Microscope

ARK Invest buys Alphabet shares before Q1 earnings as Google Cloud revenue surges 47-50%, but $185B capex weighs on profits.

The clock was ticking toward Alphabet’s first-quarter earnings release when Cathie Wood’s ARK Innovation ETF made a decisive move. Hours before the numbers hit the tape, the fund snapped up roughly $14 million worth of Alphabet shares — a late-stage wager that the tech giant’s massive AI spending is about to pay off.

Alphabet’s stock, trading at around €297.75, sits barely a whisper below its 52-week peak. The 12-month gain of nearly 112 percent leaves little room for disappointment, and the options market is bracing for a swing of almost six percent after the report — four times the historical average for recent quarters.

The Cloud Engine Is Humming

All eyes are on Google Cloud. Analysts expect the division to post revenue of roughly $18.4 billion, a blistering 47 to 50 percent jump from a year ago. The segment’s profitability has been on a steady climb since autumn 2025, with operating margins recently reaching 27 percent. That trajectory is fueling optimism that the cloud business can justify Alphabet’s current valuation of 28 times forward earnings.

A key metric to watch is remaining performance obligations (RPO). A sharp increase would signal that enterprise customers are locking in long-term contracts for generative AI services — exactly the kind of data investors need to validate the stock’s lofty multiple.

Goldman Sachs has reaffirmed its buy rating with a $400 price target, arguing that the market continues to underestimate the cloud division’s long-term contribution to overall earnings. Wedbush, meanwhile, sees potential for cloud growth to exceed 50 percent.

The $185 Billion Question

But the cloud’s ascent comes with a hefty price tag. Alphabet plans capital expenditures of $175 billion to $185 billion for fiscal 2026 — nearly double last year’s spending, driven by an aggressive buildout of data centers. Those investments are already weighing on the bottom line.

For the first quarter, analysts project revenue of about $107 billion, a 19 percent increase, but earnings per share are expected to slip to $2.63. The culprit: accelerated depreciation on Alphabet’s expanding infrastructure. Some observers even warn of negative free cash flow this year as the spending spree continues.

What’s Next for Shareholders

Beyond the operating numbers, the market will be watching for updates on capital returns. A modest dividend hike and continued share buybacks at the current pace are both on the table. The reaction should be immediate — the implied post-earnings volatility of nearly six percent leaves no doubt that traders are bracing for fireworks.

This earnings report is just the opening act. Google I/O and other key conferences through May will offer a deeper look at Alphabet’s new AI applications. For now, though, the script is clear: the cloud margin needs to prove that the company’s $185 billion bet is already generating tangible returns.