Alphabet reported first-quarter revenue of $109.9 billion, exceeding Wall Street estimates of $107.2 billion, according to LSEG data. The growth was driven by a surge in enterprise spending on artificial intelligence, which delivered the best quarter for its cloud unit since the AI boom began.
Key Takeaways
Alphabet reported first-quarter revenue of $109.9 billion, exceeding estimates driven by AI-driven cloud growth. Google Cloud revenue surged 63% to $20 billion, the highest since tracking began in 2020. The company increased its capital expenditure guidance for 2026 and announced direct sales of TPU chips competing with Nvidia's GPUs.
The company's shares rose more than 7% in extended trading. Google Cloud revenue grew 63% to $20 billion, well above analysts' average estimate of a 50.1% increase, according to data compiled by LSEG. This growth rate is the best since Alphabet began breaking out the segment's revenue in 2020.
Operating income for the cloud unit tripled to $6.6 billion from $2.2 billion a year earlier, while Alphabet's overall consolidated operating income increased 30% to $39.7 billion. CEO Sundar Pichai announced that Google began selling its TPU chips directly to some customers, which compete with Nvidia's GPUs.
The company also updated its capital expenditure guidance for 2026, increasing it from a previous estimate of $175 billion to $185 billion. Alphabet now expects spending between $180 billion and $190 billion. Capital spending in the first quarter more than doubled from a year earlier to $35.67 billion.
The reactions underscore a growing divide as the biggest tech companies pour record sums into AI infrastructure, with investors increasingly rewarding those that are translating spending into clear revenue growth. Analysts and investors believe Google is scooping up a large chunk of new computing demand thanks to its AI tools for businesses and powerful custom chips that have attracted customers like Anthropic.
Despite similar upbeat results, Wall Street had very different reactions compared to Meta. While Alphabet's shares popped 7% in extended trading, Meta's stock fell 7%. This disparity is attributed to Alphabet's robust cloud infrastructure business, which allows it to turn AI investments into revenue more effectively than Meta.
All three top cloud infrastructure providers—Google Cloud, Amazon Web Services (AWS), and Microsoft Azure—surpassed analyst estimates in earnings reports. Google Cloud saw revenues shoot up 63% to $20.03 billion, surpassing StreetAccount's consensus of $18.05 billion. This marks the strongest rate of growth for any period since Google started breaking out cloud results in 2020.
Google is competing with OpenAI and Anthropic in the market for AI models, as Gemini continues to gain adoption. The company is also seeing accelerating growth from its homegrown tensor processing units (TPUs), which are emerging as an alternative to Nvidia's graphics processing units (GPUs). Revenue from products built with Google generative AI models grew 800%, according to CEO Sundar Pichai.
AWS, which leads the cloud infrastructure market, increased revenue by 28% to $37.6 billion. Microsoft reported 40% growth in Azure and other cloud services, topping estimates from StreetAccount and CNBC. Expansion for all three companies is coming at a hefty price, as they collectively expect to shell out close to $600 billion this year on capital expenditures.
The results highlight the intense competition in the cloud infrastructure market, with smaller so-called neocloud providers like CoreWeave and Nebius obtaining 5% of the market. Analysts forecast sustained strong growth in the years ahead, driven by AI continuing to boost cloud provider revenues.
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