Google justifies its massive AI spending with booming cloud business
Alphabet's latest quarterly results show Google Cloud revenue surged 82% to $24.8 billion, with profit hitting $112.1 billion, driven largely by enterprise AI adoption.
Alphabet investors have long worried that the company's massive AI spending isn't worth the cost. The latest earnings report should ease those concerns: Google Cloud revenue spiked 82% year-over-year to $24.8 billion, well above last quarter's 63% growth to $20 billion and beating Wall Street estimates of $22.46 billion. Profit reached $112.1 billion, a huge jump from $28.1 billion a year ago.
Overall Alphabet revenue grew 24% to $119.8 billion, while Google Services revenue rose 15% to $94.5 billion. CEO Sundar Pichai said AI investments are redefining possibilities across the business. Gemini, Google's AI chatbot, now has 950 million monthly active users, up from 750 million in Q4 2025.
Cloud gains were driven by enterprise AI solutions and infrastructure adoption. The cloud contracting backlog—work not yet converted to revenue—stood at $514 billion. Capital expenditures for data centers, chips, and infrastructure are estimated at $180–$190 billion for the year. When pressed on returns, Pichai pointed to 2027, citing strong demand indicators and long-term deals.
