Alphabet Posts Record Cloud Growth as AI Spending Surges
The internet giant’s Google Cloud backlog nearly tripled to $460 billion in the quarter.
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.
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. 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. 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.
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. 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.
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. 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.
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. 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. Total debt surpassed $100 billion, more than doubling from $46.5 billion at the end of 2025.
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. Alphabet increased its dividend by 5% to $0.22 a share.