Investors in Alphabet have raised concerns regarding the company’s substantial investments in artificial intelligence, questioning their return. However, the latest earnings report should provide some reassurance.
Key Insight: Google’s cloud sector, significantly boosted by the adoption of AI in enterprises, is experiencing remarkable growth. The company reported an 82% increase in Google Cloud revenue compared to the same period last year, reaching $24.8 billion. This figure not only surpasses last quarter’s 63% year-over-year growth, which amounted to $20 billion, but also exceeds Wall Street’s expectations for this quarter, which were set at $22.46 billion.
This surge in cloud revenue is primarily attributed to the increasing demand for AI solutions and infrastructure, as stated by the company. Furthermore, the backlog of cloud projects awaiting revenue conversion has reached $514 billion.
Alphabet’s profits soared to $112.1 billion, a significant increase from last year’s $28.1 billion, as outlined in the earnings report. Overall, Alphabet’s revenue rose 24% year-over-year to $119.8 billion in the past quarter, with revenue from Google Services also climbing 15% to $94.5 billion.
“Our investments in AI are transforming possibilities across all areas of our business,” Google CEO Sundar Pichai declared during the earnings call. “We are experiencing exciting momentum across the board.”
More users are adopting Gemini, Google’s AI chatbot, which now boasts 950 million monthly active users, up from 750 million in the previous report for Q4 2025.
Notably, revenue increases are a common trend for Google, marking the 12th consecutive quarter of double-digit revenue growth. However, this quarter is particularly notable for the tech company.
Despite these impressive revenue figures, Alphabet remains committed to significant expenditures, with capital outlays—used for building data centers, acquiring chips, and enhancing infrastructure—projected at between $180 billion and $190 billion for the year. Analysts during the earnings call questioned Pichai about the timing and expected returns on these investments.
“I believe our investments in computing capacity will show returns by ’27,” he responded. “We are witnessing encouraging signs of demand, including long-term agreements,” he added. “If anything, the current situation appears healthier than it did a year ago, which gives us the confidence to proceed with these investments,” he stated.
