Alphabet, Google's parent company, has reported a significant surge in its cloud business, largely driven by the widespread adoption of artificial intelligence (AI) solutions and infrastructure by enterprises. This robust performance appears to be justifying the tech giant's substantial AI spending, which had previously caused concern among investors.
Google Cloud's revenue witnessed an impressive 82% increase compared to the same period last year, reaching $24.8 billion. This figure comfortably surpassed both the previous quarter's 63% growth and Wall Street analysts' expectations of $22.46 billion. The company attributed much of this growth to the strong demand for its enterprise AI offerings, with its backlog of cloud contracting work, representing future revenue, climbing to an eye-watering $514 billion.
The positive momentum extended across Alphabet's operations, with overall profit hitting a record $112.1 billion, a substantial leap from $28.1 billion reported a year prior. Total revenue for Alphabet grew 24% year-on-year to $119.8 billion, while Google Services revenue also saw a healthy 15% jump to $94.5 billion. Sundar Pichai, Google CEO, highlighted the impact of AI, stating during a recent earnings call that "Our AI investments are redefining what’s possible across every part of our business."
Further demonstrating its AI push, Google's AI chatbot, Gemini, has seen a considerable increase in users, now boasting 950 million monthly active users, up from 750 million in Q4 2025. This marks the company's twelfth consecutive quarter of double-digit revenue growth, underscoring a consistent period of expansion, though this latest quarter stands out as particularly strong.
Despite the positive financial results, Alphabet's capital expenditures remain substantial. The company anticipates spending between $180 billion and $190 billion for the year on data centres, chip acquisitions, and infrastructure expansion. Mr Pichai addressed analyst questions regarding these investments, expressing confidence in future returns, particularly from compute capacity investments expected in 2027, citing "strong demand indicators, including long-term deals."