Alphabet Posts Record Cloud Growth as AI Spending Surges

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• GOOGL

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Alphabet (GOOGL) reported first-quarter results that underscored its accelerating push into cloud computing and artificial intelligence, even as its core advertising business showed mixed momentum. Revenue rose 22% year-over-year to $110 billion, marking the fastest growth in six quarters [1][2][3].

The quarter stood out for Google Cloud, which saw revenue jump 63% from a year earlier, outpacing the 48% growth recorded in the prior quarter and 34% in the third quarter of 2025 [1][2][3][4]. The unit’s backlog nearly tripled quarter-over-quarter to $460 billion, up from $155 billion in the third quarter of 2025, signaling robust demand for its enterprise AI and infrastructure services [1][4]. Google Search & Other revenue grew a steady 19%, matching the prior quarter’s pace, while YouTube ads slowed to 11% growth after expanding 19% in the fourth quarter [1][2][3].

Earnings per share surged 82% to $5.11, though the figure was lifted by a $37.7 billion net gain on non-marketable equity securities, the company said [2][3]. Without that one-time boost, net income climbed 30% year-over-year. Operating margin expanded to 36.1%, up from 32% in the prior quarter, as cost controls offset higher capital spending [2][3][4].

Alphabet’s AI investments continued to scale rapidly. Its first-party model APIs now process 19 billion tokens per minute, a sixfold increase from a year earlier, reflecting broader adoption of its generative AI tools [1][2][4]. The company also reported 350 million paid subscriptions, up from 325 million in the prior quarter, with consumer AI plans driving the strongest quarterly growth to date [1][2][3].

Guidance for 2026 capital expenditures was raised to a range of $180 billion to $190 billion, up from the prior $175 billion to $185 billion target [1][3]. Free cash flow fell to $10.1 billion from $24.6 billion in the prior quarter, as higher spending on data centers and AI infrastructure weighed on liquidity [2][3][4]. Total debt surpassed $100 billion, more than doubling from $46.5 billion at the end of 2025 [1][5].

The company also announced an upsized $84.75 billion equity capital raise, including a $10 billion private placement with Berkshire Hathaway, and disclosed plans for a $40 billion at-the-market offering program to fund tax obligations tied to employee equity grants [6][7][8]. Alphabet increased its dividend by 5% to $0.22 a share [2][3].

Citations

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