Google justifies its massive AI spending with a booming cloud business
Google's cloud business is thriving, as companies adopting its AI and AI infrastructure services help the tech giant to report record profits.
Alphabet investors have very publicly worried that the companyβs massive AI spending isnβt worth the money. With the companyβs latest earnings report, those investors should be able to relax a little.
The takeaway: Googleβs cloud business β driven largely by enterprise AI adoption β is booming. The search giant saw Google Cloud revenue spike 82% from where it was this time last year, climbing to $24.8 billion. Thatβs well above last quarterβs generous year-over-year growth, which showed a revenue jump of 63% to $20 billion β and it handily beats what Wall Street analysts expected for this quarterβs growth (the expectation was $22.46 billion).
Those cloud gains were driven largely by enterprise AI solutions and enterprise AI infrastructure adoption, the company said, while also noting that its backlog of cloud contracting work β that is, work that it hasnβt yet converted into revenue β had climbed to $514 billion.
The companyβs profit hit $112.1 billion, which is a massive jump from this time last year, when the company reported $28.1 billion in profit, the companyβs earnings report shows. Meanwhile, Alphabetβs overall revenue grew 24% year-over-year during the past quarter to $119.8 billion. The company also saw Google Services revenue jump 15% to $94.5 billion.
βOur AI investments are redefining whatβs possible across every part of our business,β said Google CEO Sundar Pichai during Wednesdayβs earnings call. βWe have exciting momentum across the board.β
More people are also adopting Gemini, Googleβs AI chatbot, as the app currently enjoys 950 million monthly active users, the company said. In Q4 of 2025, Google reported that the app had 750 million users.
Itβs worth noting that spiking revenue isnβt unusual for Google. This marks the companyβs 12th consecutive quarter of double-digit revenue growth. But even by that standard, this quarter represents a particularly bountiful period for the tech giant.
Alphabetβs spending is still hefty, with its capital expenditures β the money it spends building data centers, buying chips, and expanding infrastructure β estimated to be between $180 billion and $190 billion for the year β a fact not lost on analysts during Wednesdayβs earnings call. Several pressed Pichai on when, and how much, those investments will pay off.
βI think our compute capacity investments in β27,β he said. βWe are seeing strong demand indicators, including long-term deals,β he continued. βI think, if anything, the dynamics look healthier than where we were about a year ago, so thatβs what gives us the confidence to undertake those investments,β he said.
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