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

Google Cloud, the enterprise underneath dad or mum 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. Nonetheless, traders on the corporate’s earnings name expressed concern concerning the constraints surrounding the enterprise and the way Google decides to allocate cloud capability.

Within the first quarter of 2026, the corporate mentioned its cloud progress was pushed by robust efficiency within the Google Cloud Platform, which grew at a better charge than the Google Cloud division’s total income progress. (The Cloud division consists of quite a lot of companies like infrastructure, information analytics, AI/ML instruments, and Google Workspace.)

Alphabet CEO Sundar Pichai informed analysts on the Q1 2026 earnings name on Wednesday that this progress 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 had been the most important driver of cloud progress, with merchandise constructed on Google’s genAI fashions rising almost 800% year-over-year. Google Gemini Enterprise additionally grew 40% quarter-over-quarter, the corporate mentioned, and AI token progress by way of 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 mentioned.

Nonetheless, the exec warned, there have been constraints to this progress, 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 completely different from different rivals.

“Clearly, we’re compute constrained within the within the near-term,” Pichai mentioned. “And for instance, our cloud income would have been increased if we had been capable of meet that demand. So we’re working by that second, and we’re investing, however we now have 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 mentioned.

A lot of the corporate’s income potential comes from offering infrastructure by the cloud, and, with some prospects, the direct sale of TPU {hardware} as effectively. Pichai informed 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.”