Google Cloud surpasses $20B but says growth was capacity-constrained

Google Cloud, the enterprise underneath mother or father firm Alphabet that gives enterprise AI options, had a blowout first quarter, with revenues topping $20 billion for the time, a 63% improve from the identical interval final yr. Nevertheless, traders had been involved concerning the constraints surrounding the enterprise and the way Google decides to allocate cloud capability.

Within the first quarter of 2026, the corporate stated its cloud development was pushed by sturdy efficiency within the Google Cloud Platform, which grew at a better fee than the Google Cloud division’s general income development. (The Cloud division consists of a wide range of providers like infrastructure, knowledge analytics, AI/ML instruments, and Google Workspace.)

Alphabet CEO Sundar Pichai advised analysts on the Q1 2026 earnings name on Wednesday that this development got here from “sturdy demand” for Gemini Enterprise and its AI options, and pointed to an elevated demand for infrastructure, together with TPU {hardware} and knowledge facilities.

AI options had been the most important driver of cloud development, with merchandise constructed on Google’s genAI fashions rising practically 800% year-over-year. Google Gemini Enterprise additionally grew 40% quarter-over-quarter, the corporate stated, and AI token development through its API grew to 16 billion tokens per minute, up from 10 billion within the fourth quarter.

Pichai famous different cloud milestones, together with new buyer acquisition doubling year-over yr, deal momentum doubling the variety of $100 million to $1 billion offers year-over-year, with the corporate signing a number of “billion-dollar-plus” offers. Prospects additionally outpaced their preliminary commitments by 45% quarter-over-quarter, he stated.

Nonetheless, the exec warned, there have been constraints to this development, noting that Google Cloud’s backlog had doubled within the quarter to $462 billion. He spun this as a optimistic for the corporate, noting that it demonstrated how Google Cloud was completely different from different opponents.

“Clearly, we’re compute constrained within the within the near-term,” Pichai stated. “And for example, our cloud income would have been greater if we had been capable of meet that demand. So we’re working via that second, and we’re investing, however now we have a sturdy, long-range planning framework…we see extraordinary alternatives forward,” he added.

The corporate expects to work via 50% of the backlog over the subsequent “24 months,” it stated.

A lot of the corporate’s income potential comes from offering infrastructure via the cloud, and, with some prospects, the direct sale of TPU {hardware} as properly. Pichai advised traders that Google takes an method that considers the return on capital funding (ROIC), which helps it to proceed to correctly spend money on the “leading edge.”