- Alphabet reported Q1 revenue of ~$110 billion (+22% YoY) and net income of $62.6 billion (+81%), beating analyst expectations across the board.
- Google Cloud revenue hit $20 billion (+63% YoY), with its infrastructure backlog surging to $460 billion — up from $240 billion just last quarter — driven by enterprise AI and TPU chip demand.
- Alphabet raised its 2026 capex guidance to $180–$190 billion and said 2027 capital expenditures will “significantly increase” compared to 2026.
- Google will begin selling its custom TPU chips directly to customers — in addition to cloud access — a move that could substantially expand its chip revenue starting 2027.
What Happened?
Alphabet delivered a blowout first quarter, with revenue of approximately $110 billion and net income of $62.6 billion — an 81% year-over-year profit surge. CEO Sundar Pichai declared that AI is “lighting up every part of the business,” with Google Cloud emerging as the clearest proof point: the unit posted $20 billion in revenue, a 63% jump from Q1 2025, powered by soaring demand for enterprise AI platforms, AI agents, and the company’s custom Tensor Processing Unit chips. The cloud backlog nearly doubled in a single quarter to $460 billion, and Alphabet expects to recognize roughly half of that as revenue over the next two years. Shares rose more than 6% in after-hours trading.
Why It Matters?
Alphabet’s results are a direct answer to the AI investment skepticism that rattled markets earlier this week when OpenAI missed its own targets. Google’s numbers show that at least one of the major AI platform companies is generating real, accelerating revenue from the AI buildout — not just spending. The 63% cloud growth rate is especially significant: it signals Google is gaining ground on AWS and Azure in the AI infrastructure race, and that enterprises are actively choosing to run their AI workloads on Google’s platform. The company’s decision to also sell TPU chips directly — not just offer them through cloud — opens an entirely new revenue line and puts Google in more direct competition with Nvidia in the AI accelerator market.
What’s Next?
Alphabet’s CFO signaled 2027 capex will be even higher than 2026’s already elevated $180–$190 billion guidance, underscoring a multi-year commitment to AI infrastructure that won’t slow down. The company’s Gemini 3 model, launched last November, has been eating into OpenAI’s ChatGPT market share — with the Journal reporting this week that OpenAI missed revenue targets partly because of Gemini’s competitive pressure. Google also recently avoided breakup-level antitrust penalties in its search monopoly case. With cloud backlog at record levels, the TPU chip business ramping, and AI search driving a 19% revenue increase in core search, Alphabet is executing on multiple AI monetization vectors simultaneously — a position few competitors can match.
Source: The Wall Street Journal
