Google Cloud’s growth rate stayed in the same band in the quarters before the run, but the margin underneath it was doubling in plain sight.

Alphabet (GOOGL) stock has gained 71% over the past year, against 22% for the S&P 500, while MSFT fell 2.7%, META fell 21.9%, and AMZN roughly matched the index. The one-word explanation is AI. The narrower one is more useful: the run tracked a single segment converting growth into profit, and it had been publishing that evidence for a year before the price moved.

The Cloud Margin Was Climbing While The Growth Rate Held Its Range

In its fiscal Q2 2024 report, Google Cloud earned an 11% operating margin on $10.3 billion of revenue. By fiscal Q3 2024 it was…