What Management Said
Read the full Q1 2026 transcript ↗A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website located at abc.xyz/investor. Cloud accelerated again this quarter due to strong demand for our AI products and infrastructure. Revenue grew 63%, exceeding $20 billion for the first time, and our backlog nearly doubled quarter-on-quarter to over $460 billion. Gemini Enterprise is seeing tremendous momentum with 40% growth quarter-over-quarter in paid monthly active users.
Starting with our AI infrastructure, it's the foundation of our full-stack approach to AI, driving customer growth and product adoption. We continue to invest in improvements to AI Overviews, which are driving overall search growth, and we are also seeing strong growth in both users and usage of AI Mode globally. Our enterprise AI solutions have become our primary growth driver for Cloud for the first time. In Q1, revenue from products built on our GenAI models grew nearly 800% year-over-year.
We are winning new customers faster with new customer acquisition doubling compared to the same period last year. We saw 9x year-over-year growth, both in seats sold with partners and in the number of partners adopting it for internal use. As cybersecurity threats from the use of AI models accelerate, our expertise in AI and cybersecurity is driving strong demand for our agentic defense offerings. In March, we closed the acquisition of Wiz, a leading cloud and security AI platform, which is an incredible fit for the moment we are in.
What went well
- Consolidated revenue reached $109.9 billion, up 22% (19% constant currency), the 11th consecutive quarter of double-digit revenue growth.
- Google Search and other revenue grew 19% to $60.4 billion, driven by retail and financial services, with queries at an all-time high.
- Google Cloud revenue accelerated again to 63% growth, exceeding $20 billion for the first time; operating income tripled to $6.6 billion with margin up from 17.8% to 32.9%.
- Cloud backlog nearly doubled sequentially to $462 billion, aided by newly included TPU hardware sales agreements.
- Revenue from products built on Google's generative AI models grew nearly 800% YoY; enterprise AI solutions became Cloud's primary growth driver for the first time.
- First-party models process over 16 billion tokens per minute via direct API (up from 10 billion last quarter); paid consumer subscriptions reached 350 million.
- Gemini Enterprise paid monthly active users grew 40% quarter-over-quarter; closed the Wiz acquisition (performance exceeding expectations) and the Intersect acquisition.
- Net income increased 81% to $62.6 billion and EPS grew 82% to $5.11; board declared a 5% dividend increase.
- Cost of core AI responses reduced more than 30% since upgrading AI Overviews and AI Mode to Gemini 3; search latency cut more than 35% over five years.
What went wrong
- Network advertising revenue declined 4% to $7.0 billion.
- Free cash flow fell to $10.1 billion in the quarter as CapEx surged to $35.7 billion.
- Company remains compute-constrained; cloud revenue would have been higher if demand could be met.
- A low single-digit percentage point headwind to Cloud operating margin is expected for the remainder of 2026 from the Wiz acquisition.
- Continued significant technical-infrastructure investment will keep pressuring the P&L through higher depreciation and data-center energy costs.
- Other Bets posted a $2.1 billion operating loss (revenue $411 million); Verily was deconsolidated and GFiber's planned combination will lead to its deconsolidation.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year CapEx | FY2026 | $180 billion-$190 billion (now includes Intersect acquisition) |
| CapEx direction | FY2027 | expected to significantly increase vs. 2026 |
| FX tailwind to consolidated revenue | Q2 2026 | ~1 percentage point expected |
| Cloud operating margin (Wiz impact) | remainder of 2026 | low single-digit percentage point headwind expected |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | +22% (19% cc) | Broad strength led by Search and Cloud acceleration, plus a strong FX tailwind. |
| Google Search and other revenue | +19% | Growth in retail and financial services verticals; AI Overviews and AI Mode driving all-time-high queries. |
| YouTube advertising revenue | +11% | Driven by direct response advertising, followed by brand. |
| Network advertising revenue | -4% | Continued network decline. |
| Subscriptions, platforms and devices revenue | +19% | Strong YouTube subscriptions (Music and Premium) and Google One growth from AI-plan demand. |
| Google Cloud revenue | +63% | Enterprise AI solutions (largest contributor, Gemini 3 demand), AI infrastructure (TPU/GPU deployment), and core GCP; exceeded $20 billion. |
| Google Cloud operating income | tripled to $6.6 billion (margin 17.8%->32.9%) | Strong top-line leverage and efficient technical-infrastructure operations, partly offset by depreciation. |
| Google Services operating income | +24% | Strong Search and subscriptions growth; margin 45.3%. |
| Alphabet operating income | +30% | Operating margin expanded to 36.1% on revenue leverage. |
| Net income | +81% | Grew to $62.6 billion, primarily due to $37.7 billion of other income from unrealized gains on non-marketable equity securities. |
| Earnings per share | +82% | Net income growth; EPS $5.11. |
| Other Bets revenue | $411 million (operating loss $2.1 billion) | Continued investment in businesses like Waymo; Verily deconsolidated. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Cloud revenue growth rate | +48% (Q4) | +63% | — |
| Cloud backlog | $240 billion (Q4) | $462 billion (nearly doubled sequentially, includes TPU hardware sales) | — |
| First-party model token throughput | over 10 billion tokens per minute (Q4) | more than 16 billion tokens per minute | — |
| GenAI-model product revenue growth | nearly 400% YoY (Q4) | nearly 800% YoY | — |
| Full-year 2026 CapEx outlook | $175-185 billion | $180-190 billion | — |
| Q1 CapEx (actual) | $27.9 billion (Q4 2025) | $35.7 billion | — |
| TPU distribution model | TPUs offered via Google Cloud only | beginning to deliver TPUs to select customers in their own data centers | — |
| Share of customer Search spend using AI-enabled campaigns | not previously disclosed | more than 30% (AI Max or Performance Max) | — |
Q&A Summary
Brian Nowak (Morgan Stanley): Where next-generation compute is most exciting to apply in Search over the next 12 months, and the philosophy for pricing TPUs sold to third parties given the high ROIC of powering Cloud workloads.
Pichai: Big opportunity to go deeper for users across Search and the Gemini app, especially bringing agentic workflows into Search; early innings but full-stack approach positions Google well. On TPUs: framed as part of helping Google Cloud customers; direct TPU sales make sense in select cases (e.g., capital markets, frontier AI labs), taken with an ROIC approach that also builds economies of scale.
Doug Anmuth (JPMorgan): Whether current CapEx can service the rapidly growing backlog, and drivers of all-time-high Search queries plus room to increase ad coverage beyond the historical ~20%.
Ashkenazi: Has increased CapEx thoughtfully each year to meet demand; strong Search and Cloud growth and backlog are the ROIC proof points; will raise CapEx to meet demand responsibly. Schindler: Search strength came from many parts working together (retail, finance, health, all major verticals); Gemini's intent understanding expands ability to monetize longer/complex queries, so there is upside in the ~20% coverage number.
Eric Sheridan (Goldman Sachs): How Alphabet's unique AI-infrastructure approach positions it competitively given the disclosed backlog, and what UCP means for the services business as agentic commerce scales.
Pichai: Genuinely differentiated as the only provider with a vertically optimized stack co-developing infrastructure, models, platforms, tools, agents, and security; owning frontier models and silicon keeps Google ahead, guided by an ROIC framework. Schindler: Agentic is additive and will transform shopping from discovery to decisions; UCP is an open standard co-developed with industry leaders enabling a new checkout in AI Mode, Search, and the Gemini app.
Ross Sandler (Barclays): How price and volume growth for core AdWords evolve as more agentic, frictionless shopping workflows are implemented in Search.
Schindler: Number-one focus is the user experience; carefully designing space in agentic workflows so users see valuable components, which then creates room for interesting advertising models; also using AI (apparel try-on, Google Lens) to improve the shopping experience.
Michael Nathanson (MoffettNathanson): How capacity is allocated across internal divisions and external projects while constrained, and the decision-making on adding advertising to the Gemini app.
Pichai: Foundation is compute for Google DeepMind frontier-model R&D and training; then long-range plans for Search, YouTube, and Cloud (enterprise AI solutions up 800% YoY, TPU hardware demand), modeled and allocated via a robust ROIC framework; compute-constrained near-term. Schindler: Gemini-app monetization focus is currently on AI Mode formats that would transfer to the app; today focused on free tier and subscriptions; not rushing ads.
Mark Shmulik (AllianceBernstein): Whether consumers using AI tools are shrinking purchasing journeys and converting at higher rates, and how to dimensionalize behavioral change vs. new advertiser AI tools in Search strength.
Schindler: Frame it as an expansionary moment; AI is fundamentally changing how the world searches; queries at an all-time high; AI Overviews, AI Mode, Lens, Circle to Search, Search Live, AI-driven campaigns, and SMB reach all combine to put Google in a good place.
Ron Josey (Citi): Breakdown of the drivers of margin expansion, particularly in Google Cloud, given the thesis that AI revenue is lower margin.
Ashkenazi: Robust revenue growth in Cloud and Google Services provides leverage to the bottom line; efficiency across the organization including scientific/process innovation in technical infrastructure (cost allocated by consumption); Cloud margin expanded significantly on top-line growth and efficient operations, though depreciation remains a headwind.
Ken Gawrelski (Wells Fargo): How verticalized capabilities help navigate a constrained/inflationary supply chain (and whether inflation is in the CapEx outlook), internal vs. external compute allocation, and whether some consumer search use cases are better monetized via subscriptions.
Pichai: Factoring the complicated supply-chain environment into commentary; scale, diversified demand, and frontier technology deepen supply-chain partnerships and build economies of scale. On Search: builds models across the capability and cost frontier to serve at scale while offering more powerful models via subscription tiers, with a robust AI-subscription growth quarter.
Justin Post (Bank of America): The opportunity from TPU sales and how much backlog growth relates to TPUs vs. Cloud, and margins on large generative-AI cloud deals.
Pichai: Tremendous demand for both AI solutions and AI infrastructure (GPUs and TPUs); nothing specific on contract margins, but allocation in a constrained environment is driven by a robust ROIC framework. Ashkenazi: TPU hardware agreements are within the $462 billion backlog but the majority is still GCP; just over half of total backlog converts to revenue within 24 months, with most TPU-hardware revenue realized in 2027.
More on Alphabet Inc.
Reported 2026-04-29 · figures from the Alphabet Inc. Q1 2026 earnings call.
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