Key insights
- The author suggests Google's cloud backlog recognition over the next 2 years could lead to substantial revenue and earnings growth, potentially exceeding Apple's 2025 earnings. This projection implies a significantly higher market capitalization for Google, potentially reaching $6.5-7 trillion. The analysis hinges on backlog conversion rates and margin assumptions for Google's cloud and chip businesses.
On the earnings call Google shared they were going to recognize over 50% of their $462 billion dollar backlog in the next 24 months.
That would make Google cloud operation have $310 billion of revenue in 2 years.
The current margins for their cloud business is 33%. But increasing. The backlog for Google includes both cloud and chips so think a 40% margin is reasonable.
That would give Google $124 billion of new earnings. Apple in 2025 made $117 billion or actually LESS than the size of Google's cloud business in 2 years.
If we look at market cap it means Google should be over a $7 trillion dollar company and that is only using a multiple of 30. It could be higher. Heck it is 35 right now. Or could be lower obviously. If we use a 25 multiple you still a $6.5 trillion dollar company.
Why is nobody talking about this?
What do I have wrong here?