Alphabet Investors May Be Underestimating Google Cloud's Potential

Alphabet's Google Cloud segment has been growing rapidly in recent quarters, with its revenue and profits accelerating quickly. In Q2 2025, Google Cloud's top line rose 32% year over year, followed by 34% growth in Q3 and 48% in Q4. The fourth quarter marked the start of a meaningful acceleration, but that verbiage only made it into press releases starting in 2026's first quarter.

Google Cloud's growth rate surged to 63% year over year in Q1 2026, followed by 82% growth in Q2. This outpaced Amazon Web Services and Microsoft Azure, with no signs of a deceleration coming soon. The segment's operating income more than tripled year over year as well.

Sundar Pichai, Alphabet CEO, described the company's artificial intelligence (AI) investments as 'redefining what's possible across every part of our business.' AI workloads and large language models have substantially increased the demand for compute, giving Alphabet the flexibility to charge higher premiums for available compute.