Alphabet sales beat estimates on Google cloud, AI customers

[SAN FRANCISCO] Alphabet reported quarterly revenue and profit that beat projections, fuelled by strong growth in its cloud computing unit, signalling that the Internet giant’s unprecedented investments in artificial intelligence infrastructure are beginning to pay off.

Google’s parent company said that first-quarter revenue, excluding partner payouts, was US$94.7 billion, compared with the US$91.6 billion expected on average by analysts, according to data compiled by Bloomberg. The company reported earnings per share of US$5.11, compared with Wall Street’s US$2.62 per share estimate.

Alphabet shares gained more than 7 per cent in after-hours trading, after closing at US$349.94.

Google has been spending billions on a plan to build enough data centres with powerful servers for itself and its cloud clients as fast as possible. Investors are looking at the cloud business for signs about whether demand will continue to grow, which is considered a strong indicator for the pace of the AI boom.

Google is locked in a tight race with startups Anthropic PBC and OpenAI to develop AI that can perform on par with humans and sell it to businesses and consumers.

Google’s cloud computing unit reported sales of US$20 billion, compared with the US$18.4 billion analysts’ projection. The unit saw a “meaningful acceleration in growth”, driven by demand for its AI software and infrastructure, Google said. Backlog, the measure of contracted work that has not been recorded as revenue yet, nearly doubled from the prior quarter to over US$460 billion, the company said.

For select customers, Google will start to offer tensor processing units to use in their own data centres, a move which will expand the addressable market, Pichai said on a call with investors. TPUs are one of the best alternatives to Nvidia’s chips, and have become a coveted resource as companies hunt for computing power to keep up with demand for AI.

The company also said that it would increase its dividend by 5 per cent, resulting in a quarterly cash dividend of US$0.22.

Alphabet said in February that capital expenditures will reach as much as US$185 billion this year, double what it spent last year but aligned with record spending plans at rival companies.

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Over the past few years, Google has been hustling to reinvent its business for the AI age, trying to keep consumers in the habit of going to its search page as chatbots from startups such as OpenAI and Anthropic become more popular. The company now delivers AI-generated answers in response to many searches, a shift that has had major implications for how companies that rely on Google traffic make money.

Search queries were at an all-time high, with the integration of AI driving usage, CEO Sundar Pichai said.

In prior quarters, Alphabet’s profit has been boosted by recording a higher value of its investments in private companies, including SpaceX, which is planning an initial public offering later this year. It’s a major investor in Anthropic PBC too.

Anthropic said last week that Google will invest up to US$40 billion in the startup. Google’s relationship with both companies has grown competitive, too: SpaceX now owns xAI, Elon Musk’s AI and chatbot company. And internally, Google leaders have grown increasingly worried about falling behind Anthropic in AI coding, as the startup’s offering, Claude Code, becomes a breakout hit product. BLOOMBERG