Google Cloud surpasses $20 billion, but says growth was constrained by capacity

Google Cloud, the enterprise AI solutions company owned by parent company Alphabet, had a successful first quarter, with revenue exceeding $20 billion at one point and a 63% increase over the same period last year. But investors who attended the company’s earnings call expressed concerns about constraints surrounding the business and how Google decides to allocate cloud capacity.

The company said cloud growth in the first quarter of 2026 was driven by strong performance from Google Cloud Platform, which grew faster than revenue growth for the entire Google Cloud division. (The cloud division includes a variety of services such as infrastructure, data analytics, AI/ML tools, and Google Workspace.)

Alphabet CEO Sundar Pichai told analysts on Wednesday’s Q1 2026 earnings call that this growth was due to “strong demand” for Gemini Enterprise and its AI solutions, pointing to increased demand for infrastructure such as TPU hardware and data centers.

AI solutions are the biggest driver of cloud growth, with products built on Google’s genAI model growing nearly 800% year over year. Google Gemini Enterprise also grew 40% quarter-on-quarter, with AI token growth through the API increasing from 10 billion tokens per minute in the fourth quarter to 16 billion tokens per minute, the company said.

Pichai cited other cloud milestones, including doubling new customer acquisitions year-over-year, deal momentum doubling the number of deals between $100 million and $1 billion year-over-year, and the company closing multiple “$1 billion-plus” deals. He said customers exceeded initial commitments by 45% quarter over quarter.

Still, the executive warned that there are limits to this growth, noting that Google Cloud’s backlog doubled in the quarter to $462 billion. He interpreted this as a positive for the company, noting that it showed how Google Cloud is different from other competitors.

“In the short term, there are obviously compute constraints,” Pichai said. “And as an example, our cloud revenue would have been even higher had we been able to meet that demand. So we’re riding out the moment and making investments, but we have a solid long-term planning framework…We think there are extraordinary opportunities ahead,” he added.

The company said it plans to clear 50% of the backlog over the next “24 months.”

Much of the company’s revenue potential comes from providing infrastructure through the cloud and, for some customers, directly selling TPU hardware. Pichai told investors that Google takes a return on capital investment (ROIC) approach, which helps it continue to invest appropriately on the “cutting edge.”