Google Cloud’s quarterly revenue exceeds $20 billion; Alphabet beats expectations across the board, surging 7% after hours
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Google Cloud’s quarterly revenue exceeds $20 billion; Alphabet beats expectations across the board, surging 7% after hours
CEO Sundar Pichai stated candidly on the earnings call: “We are currently constrained by compute capacity; our cloud revenue could have been higher had we been able to meet demand.”
Navigating Web3 tides with focused insightsAuthor: Claude, TechFlow
TechFlow Intro: Alphabet’s Q1 revenue totaled $109.9 billion, up 22% year-on-year—exceeding Wall Street expectations across the board. Google Cloud revenue surged 63% to surpass $20 billion for the first time, while its backlog nearly doubled to $462 billion in a single quarter. CEO Sundar Pichai acknowledged the company is “constrained by compute capacity,” stating cloud revenue could have been even higher had demand been fully met. Alphabet raised its full-year capital expenditure guidance to as high as $190 billion, sending its after-hours stock price up roughly 7%—outperforming other tech giants reporting earnings the same day.
Alphabet, Google’s parent company, delivered a Q1 earnings report that left Wall Street with little to criticize.
According to CNBC’s April 29 report, Alphabet posted $109.9 billion in Q1 revenue, up 22% year-on-year and exceeding Wall Street’s consensus estimate of $107.2 billion. Earnings per share (EPS) came in at $5.11—far surpassing the FactSet analyst consensus of $2.63. Its stock rose approximately 7% after hours.
But what truly ignited market sentiment was the explosive growth of Google Cloud. Google Cloud generated $20.03 billion in Q1 revenue, up 63% year-on-year and well above Wall Street’s expectation of $18.05 billion. CEO Sundar Pichai stated bluntly on the earnings call: “We are temporarily constrained by compute capacity; cloud revenue could have been higher if we had been able to meet all demand.”
Google Cloud’s 63% Growth Outpaces Peers; Backlog Doubles in One Quarter
Google Cloud’s performance stands out as the brightest number among this quarter’s tech earnings reports.
Its $20.03 billion in quarterly revenue marks a 63% increase from $12.26 billion a year earlier—and accelerates sharply from Q4’s 48% growth rate. Cloud operating profit jumped from $2.2 billion a year ago to $6.6 billion, while operating margin expanded from 17.8% to 32.9%.
Even more exciting for investors is the scale of its backlog. CFO Anat Ashkenazi disclosed that Google Cloud’s backlog now stands at $462 billion—nearly double last quarter’s level. She noted that over 50% of this backlog is expected to convert into revenue within the next 24 months.
The core engine driving this growth is AI. Pichai said, “Enterprise AI solutions became the primary growth driver for Cloud for the first time this quarter.” Revenue from products built on Alphabet’s proprietary generative AI models grew nearly 800% year-on-year. Pichai revealed that the number of deals valued between $100 million and $1 billion doubled year-on-year, and the company secured multiple contracts exceeding $1 billion each.
In terms of cloud market share, Synergy Research Group data shows AWS led with ~30% in Q1, followed closely by Azure at 25%, while Google Cloud ranked third with 13%. Yet Google Cloud’s 63% growth far outpaced AWS’s 19%, accelerating its catch-up to the top two players.
The “Quality” Behind a Doubled Net Income: $36.9 Billion from Investment Gains
The most eye-catching—and asterisk-worthy—figure in the earnings report is net income.
Net income stood at $62.6 billion, up 81% year-on-year, with EPS at $5.11—a rise of 82%—far exceeding analysts’ expectation of $2.63.
However, this figure contains a significant non-operational component. According to Alphabet’s Q1 Form 8-K filing, net income included $36.9 billion in equity securities gains (primarily unrealized appreciation from private-company investments), of which $28.7 billion was recognized in net income—contributing $2.35 per share. Excluding this investment gain, underlying operational performance remains strong—but not quite as spectacular as the headline numbers suggest.
Operating profit provides a more grounded picture: consolidated operating profit reached $39.7 billion, up 30% year-on-year, with operating margin expanding two percentage points to 36.1%.
Capital Expenditures Ramped Up Again; Full-Year Guidance Raised to Up to $190 Billion
Alphabet continues to accelerate investment in AI infrastructure.
Q1 capex totaled $35.7 billion—more than double the $17.2 billion in the same period last year. Full-year capex guidance was raised from the prior range of $175–185 billion to $180–190 billion, with the upward revision largely reflecting the March acquisition of Intersect Data Centers. Ashkenazi also indicated that capex in 2027 is expected to be “significantly higher” than in 2026.
This quarter, approximately 60% of technology infrastructure investment went toward servers, and 40% toward data centers and networking equipment. Ashkenazi attributed this spending to “unprecedented internal and external AI compute demand.”
This stands in sharp contrast to Meta, which reported earnings the same day: according to Fortune, Meta raised its capex guidance to $125–145 billion, yet its stock fell over 6% after hours. Alphabet’s stock rose ~7% after hours—highlighting markedly divergent market views on the ROI prospects of the two companies’ AI investments.
Search Ads Grow Steadily; YouTube Slightly Below Expectations
Google’s traditional cash cows continue performing solidly.
Total Google advertising revenue reached $77.25 billion, up 15.5% year-on-year. Search and other advertising revenue amounted to $60.4 billion, up 19% year-on-year—driven primarily by retail and financial services sectors.
YouTube advertising revenue was one of the few soft spots this quarter: it came in at $9.88 billion, up 11% year-on-year but slightly below the $9.99 billion analysts had expected.
The subscription business merits attention. Alphabet currently has 350 million paid subscribers, with YouTube Music, YouTube Premium, and Google One serving as key contributors. Revenue from subscription platforms and devices totaled $12.4 billion, up 19% year-on-year.
Wiz Acquisition Closed; Waymo Hits Milestone; Gemini Adoption Accelerates
Alphabet’s strategic moves in AI and autonomous driving are advancing in parallel.
The acquisition of cloud security platform Wiz closed formally in March and will now be consolidated under Google Cloud. However, the deal is expected to exert a “low-single-digit percentage point” drag on Google Cloud’s operating margin for the remainder of 2026.
AI product adoption continues accelerating. Paid monthly active users of Gemini Enterprise rose 40% quarter-on-quarter; Alphabet’s proprietary models now process over 16 billion tokens per minute—a 60% increase from last quarter. The Gemini app has reached 750 million monthly active users.
Autonomous driving subsidiary Waymo also hit a critical milestone: it now completes over 500,000 fully autonomous rides per week and operates in 11 major U.S. cities. In February, Waymo completed a $16 billion external funding round, valuing the company at $126 billion.
In addition, Alphabet announced a 5% increase in its quarterly dividend to $0.22 per share.
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