Google Cloud surpasses $20B however says development was capacity-constrained

Google Cloud, the enterprise below guardian firm Alphabet that gives enterprise AI options, had a blowout first quarter, with revenues topping $20 billion for the time, a 63% enhance from the identical interval final yr. Nonetheless, buyers have 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 robust efficiency within the Google Cloud Platform, which grew at a better fee than the Google Cloud division’s total income development. (The Cloud division consists of quite a lot of providers like infrastructure, information 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 “robust demand” for Gemini Enterprise and its AI options, and pointed to an elevated demand for infrastructure, together with TPU {hardware} and information facilities.

AI options have been the most important driver of cloud development, with merchandise constructed on Google’s generative AI fashions rising almost 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-year, 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. Clients 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 constructive for the corporate, noting that it demonstrated how Google Cloud was totally different from different rivals.

“Clearly, we’re compute constrained within the near-term,” Pichai stated. “And for instance, our cloud income would have been increased if we have been in a position to meet that demand. So we’re working by that second, and we’re investing, however we’ve got a sturdy, long-range planning framework … we see extraordinary alternatives forward,” he added.

The corporate expects to work by 50% of the backlog over the following 24 months, it stated.

A lot of the corporate’s income potential comes from offering infrastructure by the cloud and, with some clients, the direct sale of TPU {hardware} as effectively. Pichai advised buyers that Google takes an method that considers the return on invested capital (ROIC), which helps it to proceed to correctly put money into the “leading edge.”