Google parent Alphabet’s cloud unit beats quarterly revenue estimates on strong AI demand

Shares of the company were up about 4% in extended trading.

Alphabet’s total revenue rose 22% to $109.9 billion in the first quarter, compared with an estimate of $107.2 billion, according to LSEG data.

Revenue at Google Cloud grew 63% to $20 billion in the first quarter ended March, compared with analysts’ ‌average estimate ⁠of a ⁠50.1% increase, according to data compiled by LSEG.

The cloud unit’s backlog nearly doubled quarter on quarter to over $460 billion, the company said.

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The third-largest cloud services provider globally, behind Amazon Web Services and Microsoft’s Azure, has continued to land major deals, including expanded AI infrastructure partnerships with Meta and cybersecurity firm Palo Alto Networks.

The results underscore Alphabet’s position as a key beneficiary of a global surge in spending on artificial intelligence, even as investors remain watchful of whether massive outlays ⁠on infrastructure ‌will translate into sustained growth and market share gains. Strong demand for cloud-based AI services continues to outstrip supply across the industry, pushing hyperscalers to accelerate investments in ⁠data centers, advanced chips and networking equipment.

Alphabet, Microsoft, Amazon and Meta are expected to collectively spend well over $600 billion this year to expand AI capacity, as competition intensifies and companies race to secure computing power.

Google Cloud’s performance comes at a time when rivals have delivered mixed signals on growth, helping ease concerns about potential market share losses for Alphabet in the highly competitive cloud market.

At the same time, capacity constraints remain a bottleneck across the sector, limiting providers’ ability to fully capitalize on AI-driven demand ‌despite aggressive spending plans.

Alphabet has also gained traction in its in-house AI efforts. Its Gemini models, including newer iterations rolled out this year, have seen rising adoption across enterprise and consumer applications, strengthening ⁠the company’s position in the AI race.

A partnership to power Apple’s artificial intelligence features, including upgrades to Siri, is expected to significantly expand Google’s reach across a vast global device base.

Alphabet shares have outperformed most Big Tech peers over the past year, supported by growing signs that AI integration is lifting its core search and advertising businesses.

AI-driven features such as AI Overviews and AI Mode continue to boost user engagement, while opening new avenues for monetization. The company has expanded ads within AI-generated responses across multiple markets and said monetization is broadly in line with traditional search.