Alphabet Earnings: Cloud Growth Fuels Spending Optimism

Alphabet’s first-quarter earnings report, released after the bell on Wednesday, revealed revenue that exceeded Wall Street expectations, driven by robust growth in its cloud business. Shares of the company climbed following the report. The company also raised its full-year capital expenditure guidance.

Alphabet reported earnings per share of $5.11 on revenue of $109.9 billion, surpassing the $107.2 billion revenue estimate from analysts polled by LSEG. It was unclear if the EPS was comparable to the $2.63 expected by analysts polled by LSEG.

Google Cloud Leads the Way

Google Cloud revenue reached $20.02 billion, significantly exceeding the $18.05 billion estimated by StreetAccount. This represents a 63% increase compared to the same period last year. According to CEO Sundar Pichai, enterprise AI solutions have become the primary growth driver for the cloud business in the first quarter.

“Our enterprise AI solutions have become our primary growth driver for cloud for the first time in Q1,”

Sundar Pichai

Pichai also noted that paid monthly active users of Gemini Enterprise grew by 40% from the previous quarter.

Increased Capital Expenditure

Alphabet updated its full-year capital expenditure guidance to a range of $180 billion to $190 billion, an increase from its previous estimate of $175 billion to $185 billion. This increase reflects the company’s continued investment in infrastructure to support its growing cloud business and AI initiatives. In December, Alphabet announced the acquisition of data center company Intersect for $4.75 billion in cash and the assumption of debt.

CFO Anat Ashkenazi indicated that the company’s capital expenditure in 2027 is expected to “significantly increase” compared to 2026.

Other Financial Highlights

YouTube advertising revenue came in at $9.88 billion, slightly below the $9.99 billion estimated by StreetAccount. Traffic acquisition costs were $15.22 billion, compared to an estimated $15.3 billion.

Alphabet’s revenue grew by 20% year-over-year, marking its highest growth rate since 2022.

The strong performance in cloud computing and the increased investment in capital expenditure signal Alphabet’s commitment to maintaining its competitive edge in the rapidly evolving technology landscape. The company’s focus on AI, particularly through Gemini Enterprise, appears to be resonating with customers and driving growth.