Google justifies its massive AI spending with a booming cloud business
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- Google Cloud revenue spiked 82% year-over-year to $24.8 billion, handily beating Wall Street's $22.46 billion estimate and outpacing last quarter's 63% growth
- Alphabet reported profit of $112.1 billion versus $28.1 billion a year earlier, on total revenue of $119.8 billion — a 24% YoY gain and the company's 12th consecutive quarter of double-digit growth
- Google Services revenue climbed 15% to $94.5 billion, while cloud contracting backlog reached $514 billion, signaling locked-in future AI demand
- Gemini now has 950 million monthly active users, up from 750 million in Q4 2025, according to figures shared on the earnings call
- Sundar Pichai defended $180–190 billion in annual capital expenditures, telling analysts that compute capacity investments in 2027 will pay off and pointing to "strong demand indicators, including long-term deals"
Why it matters: Cloud revenue grew at more than triple the pace of total revenue (82% vs. 24%), proving enterprise AI demand is already converting infrastructure spend into revenue today rather than just promising future returns. The $514 billion cloud backlog effectively underwrites continued heavy capex — directly answering investor fears that Alphabet's AI bet is unprofitable.
