Google Cloud surpasses $20B, but says growth was capacity-constrained

Google Cloud, under Alphabet, reported a record-breaking first quarter of 2026, with revenues exceeding $20 billion for the first time—a 62% year-over-year increase. The growth was primarily fueled by strong demand for the Google Cloud Platform, which outpaced the overall division's growth, and AI solutions built on Gemini models, which surged nearly 800% YoY. Gemini Enterprise grew 40% quarter-over-quarter, and AI token volume via API reached 16 billion per minute, up from 10 billion in Q4 2025. New customer acquisitions doubled YoY, and the number of $100 million to $1 billion deals also doubled, including multiple billion-dollar-plus agreements. Customers exceeded initial commitments by 45% quarter-over-quarter.

Despite these milestones, CEO Sundar Pichai acknowledged that Google Cloud is "compute constrained," noting that revenue would have been higher if capacity could meet demand. The company's backlog doubled to $462 billion, which Pichai framed as a positive indicator of differentiation from competitors. Google expects to work through 50% of this backlog over the next 24 months. The constraints stem from infrastructure needs, including TPU hardware and data centers, driven by surging AI demand. Pichai emphasized a disciplined approach to capital investment based on return on invested capital (ROIC), ensuring continued investment in cutting-edge technology while managing growth.