Alphabet investors had openly expressed concerns about the company’s substantial investment in AI, questioning its value. However, the latest earnings report may ease some of those worries.
The key insight: Google’s cloud sector, significantly boosted by enterprise AI adoption, is thriving. The company reported an 82% increase in Google Cloud revenue compared to the same period last year, reaching $24.8 billion. This is a notable improvement over the previous quarter’s year-over-year growth of 63% to $20 billion and surpasses Wall Street’s expectations for this quarter’s growth, which was projected at $22.46 billion.
According to the company, the surge in cloud revenue was largely fueled by the adoption of enterprise AI solutions and infrastructure. Additionally, the backlog of cloud contracts, which has not yet been realized as revenue, has risen to $514 billion.
Alphabet’s profit soared to $112.1 billion, a significant rise from the $28.1 billion reported at the same time last year. The earnings report also highlighted a 24% increase in overall revenue year-over-year, reaching $119.8 billion, with Google Services revenue climbing 15% to $94.5 billion.
“Our AI investments are redefining what’s possible across every part of our business,” stated Google CEO Sundar Pichai during the earnings call on Wednesday. “We have exciting momentum across the board.”
The adoption of Gemini, Google’s AI chatbot, is also growing, currently boasting 950 million monthly active users, according to the company. In the fourth quarter of 2025, Google reported the app had 750 million users.
It’s important to note that revenue spikes are not uncommon for Google. This marks the 12th consecutive quarter of double-digit revenue growth for the company. Nonetheless, this quarter stands out as particularly prosperous for the tech giant.
Alphabet’s capital expenditures remain substantial, with annual spending on data centers, chip purchases, and infrastructure expansion estimated between $180 billion and $190 billion. This was a point of discussion among analysts during the earnings call on Wednesday, as several questioned Pichai about the timeline and returns on these investments.
“I think our compute capacity investments in ’27,” Pichai noted. “We are seeing strong demand indicators, including long-term deals,” he continued. “I think, if anything, the dynamics look healthier than where we were about a year ago, so that’s what gives us the confidence to undertake those investments,” he added.
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