Google Cloud faces 48% revenue concentration from two unprofitable AI labs

UBS estimates OpenAI and Anthropic will drive nearly half of Google Cloud's revenue next year, a concentration risk investors can't ignore.

UBS estimates OpenAI and Anthropic will drive 48 percent of Google Cloud's revenue next year, over $124 billion, raising questions about the durability of hyperscaler AI growth.

"What looks like broad, diversified enterprise demand for AI compute is circular financing concentrated in two unprofitable private companies that do not pay their bills out of existing cash flow," Ed Zitron, CEO of EZ Primary Research, said on a Bloomberg Businessweek segment that aired August 7.

Google Cloud posted $24.768 billion in Q2 2026 revenue, up 82 percent year-over-year, its fifth consecutive quarter of acceleration. Alphabet spent $44.924 billion on capex in the quarter, more than double the prior year, and raised roughly $70 billion through combined equity and debt financing, per its Q2 8-K filing. Free cash flow turned negative at -$5.855 billion, and the buyback was suspended.

The concentration extends beyond Alphabet. Barclays puts OpenAI and Anthropic exposure at 13 percent of AWS revenue this year, rising to 18 percent next year. At Microsoft, Zitron reported that 69 percent of Intelligent Cloud's year-over-year growth in 2025 came from OpenAI alone — without it, that segment would have grown just 8 percent. The Information reported that 89 percent of the largest AI companies' revenue comes from OpenAI and Anthropic.

OpenAI's $20.9B Losses and the $1.6T Demand Gap

Zitron attacked the demand side with specific numbers. OpenAI lost $20.9 billion in 2025, and over $800 million of its revenue came from SoftBank's "Crystal Intelligence" program, of which he said he could find "no evidence of actually anything happening." Sightline Climate projects data centers will require over $1.6 trillion in annual revenue to sustain. "Two customers cannot backfill that hole," Zitron argued, "especially when Anthropic and OpenAI, well, they can't afford anything."

The rhetorical peak of the segment was a comparison to Enron. With OpenAI's IPO reportedly delayed to 2027, which Zitron called "lethal for a number of people," he argued hyperscaler executives have "a fiduciary responsibility" to shareholders that may be getting overlooked.

Grassroots discussion mirrors the concern. A Reddit thread titled "Either hyperscalers are dumb or someone else is" drew 4,024 upvotes and 1,503 comments, and a separate post flagged Alphabet's first quarter of negative free cash flow in Q2 2026.

Microsoft's $678B RPO and the Enterprise Counterargument

Markets have not punished the trade. GOOGL is up 80.8 percent over the past year, AMZN up 23.01 percent, and MSFT down 3.23 percent. Analysts remain broadly constructive, with GOOGL carrying 58 Buy ratings and an average target of $428.04.

The bull case rests on genuine enterprise demand beyond the two labs. Microsoft's commercial RPO reached $678 billion, up 84 percent year-over-year, and over 30 million paid Microsoft 365 Copilot seats are active — evidence that enterprise AI adoption extends well beyond the two labs. Microsoft's Intelligent Cloud produced $39.306 billion in Q4 FY2026 revenue, up 32 percent, with Azure growth of 43 percent. AWS delivered $42.232 billion in Q2 2026, up 37 percent year-over-year, described by Andy Jassy as its fastest growth in 18 quarters.

For investors, the question is whether the market has priced in the concentration risk. GOOGL trades at a premium to its cloud peers, and the 48 percent concentration figure from UBS suggests that a meaningful portion of that valuation depends on two private companies that have never generated a profit. If either OpenAI or Anthropic were to slow spending or shift providers, the impact on Google Cloud's growth trajectory would be immediate. Investors watching hyperscaler capex through 2027 will want to track customer disclosure closely.

This article is for informational purposes only and does not constitute investment advice.