Google Cloud Revenue Surges 63 Percent to Top Microsoft and Amazon in Growth

Google Cloud posted its fastest growth rate on record Wednesday, with revenue jumping 63% to $20.03 billion and surpassing StreetAccount estimates of $18.05 billion. The result marked the first time enterprise AI solutions became the primary growth driver for Google's cloud business, Alphabet CEO Sundar Pichai told analysts. The growth rate was the strongest since Google started breaking out cloud revenue in 2020 and outpaced both Microsoft Azure (up 40%) and Amazon Web Services (up 28%).

Synergy Research analyst John Dinsdale summed it up in an email: "Wow, that was some quarter."

Revenue from products built with Google's generative AI models grew 800% year-over-year, Pichai said. Google Cloud's backlog hit $462 billion, nearly doubling from the prior quarter, with Alphabet CFO Anat Ashkenazi telling investors the company expects more than 50% of that to convert to revenue over the next 24 months.

Alphabet rewarded investors with a different story than its peers. While Meta's stock dropped 6% after hours on news of higher AI spending and Microsoft stayed flat, Alphabet shares rose nearly 7% in after-hours trading. The difference: Google showed its AI investments were generating measurable returns.

"Looking ahead, these strong results reinforce our conviction to invest the capital required to continue to capture the AI opportunity," Ashkenazi said.

Alphabet raised its full-year 2026 capex guidance to $180 billion to $190 billion, up from a prior range of $175 billion to $185 billion.

Alphabet's cloud business is also grabbing market share from competitors, according to S&P Global's Melissa Otto, who called the results a "meaningful beat" that signals a strong competitive position. Paid monthly active users of Gemini Enterprise grew 40% over the last quarter, with Pichai pointing to deals at Bosch, Mars, and Merck.

All three cloud providers beat estimates. Microsoft earned $4.27 per share on $82.89 billion in revenue, topping analyst expectations of $4.06 and $81.39 billion respectively.

Microsoft Cloud generated $54.5 billion in the quarter, with Azure and other cloud services growing 40%. CEO Satya Nadella said Microsoft's AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.

AWS reported $37.6 billion in cloud revenue, growing 28%. But Google's 63% clip signals a shift in the cloud wars. The company's homegrown tensor processing units (TPUs) are emerging as an alternative to Nvidia's GPUs, and Google is competing directly with OpenAI and Anthropic in the AI model market through Gemini.

Cloud infrastructure spending across the industry hit $129 billion in the quarter, according to Synergy Research.

Microsoft expects capex to exceed $40 billion in its fourth quarter and $190 billion for the full year, with Nadella attributing about $25 billion of that to higher component pricing. CFO Amy Hood said the company expects to stay capacity constrained through 2026.