Google Cloud passes $20 billion, but says growth is limited by capacity

Google Cloud, which operates under parent company Alphabet, which provides enterprise artificial intelligence solutions, reported revenue of more than $20 billion in the first quarter, a 63% increase compared to the same period last year. However, investors were concerned about the limitations surrounding the business and how Google decided to allocate its cloud capacity.

in the year First quarter of 2026the company said the cloud growth was driven by the strong performance of Google Cloud Platform, which grew at a faster rate than the overall revenue growth of the Google Cloud division. (The cloud division includes various services such as infrastructure, data analytics, AI/ML tools, and Google Workspace.)

Alphabet CEO Sundar Pichai told analysts on Wednesday’s first-quarter 2026 earnings call that the growth was driven by “strong demand” for Gemini Enterprise and its artificial intelligence solutions, pointing to increased demand for infrastructure, including infrastructure. TPU hardware and data centers.

AI solutions, products built on Google’s generative AI models, were the biggest driver of cloud growth, growing nearly 800% year over year. Google Gemini Enterprise also grew 40% during the quarter, the company said, and AI token growth increased to 16 billion tokens per minute from 10 billion in the fourth quarter.

Pichai cited other cloud milestones, including doubling new client acquisition year-over-year, doubling the number of deals from $100 million to $1 billion year-over-year, and the company closing multiple “billion dollar” deals. Customers also exceeded their initial commitments by 45% quarter-over-quarter, he said.

However, the executive cautioned that there are limits to that growth, noting that Google Cloud’s backlog doubled in the quarter to $462 billion. He viewed this as a positive for the company, noting that it demonstrates how Google Cloud differentiates itself from other competitors.

“Obviously, our calculations are limited in the near term,” Pichai said. “And as an example, if we could meet that demand, our revenue from the cloud would be higher. So we’re working on that moment and investing, but we have a solid, long-term planning framework … we see extraordinary opportunities ahead,” he said.

The company expects to employ 50% of the backlog over the next 24 months.

Much of the company’s revenue potential comes from providing infrastructure through the cloud and direct sales of TPU hardware with some customers. Pichai told investors that Google takes a return-on-invested-capital (ROIC) approach, which helps it continue to make the right investments in “advanced space.”