Google Cloud revenue tops $20 billion for first time but growth held back by capacity constraints

Google Cloud revenue exceeded $20 billion for the first time in the first quarter of 2026, a 63% increase from the same period last year, though executives told investors that growth was held back by supply constraints. The cloud division, which includes infrastructure, data analytics, artificial intelligence and machine learning tools, and Google Workspace, was led by strong performance in the Google Cloud Platform, which grew at a higher rate than the division's overall revenue growth. Alphabet CEO Sundar Pichai told analysts on the company's earnings call that the growth came from strong demand for Gemini Enterprise and its artificial intelligence solutions, alongside increased demand for infrastructure such as TPU hardware and data centers. Artificial intelligence solutions were the largest driver of cloud growth, with products built on Google's generative AI models growing nearly 800% year-over-year. Google Gemini Enterprise grew 40% quarter-over-quarter, and API token growth reached 16 billion tokens per minute, up from 10 billion in the fourth quarter. New customer acquisition doubled year-over-year, and deal momentum doubled the number of $100 million to $1 billion deals year-over-year, with the company signing multiple billion-dollar-plus contracts. Customers also outpaced their initial commitments by 45% quarter-over-quarter. Despite the strong results, Pichai warned that Google Cloud was compute constrained in the near term and that its cloud revenue would have been higher if the company could have met demand. The company's cloud backlog doubled during the quarter to $462 billion, which Alphabet expects to work through roughly half of over the next 24 months. Pichai noted that Google takes a return-on-capital approach when deciding how to invest in infrastructure and direct TPU hardware sales.