Google CEO says AI has changed revenue picture completely

Hillary Remy

Mon, June 22, 2026 astatine 8:03 AM CDT 5 min read

For 2 decades, Alphabet (GOOGL) generated gross chiefly done advertising, including hunt ads, YouTube ads, and show ads crossed its network. On the company's Q1 2026 net telephone successful April, CEO Sundar Pichai described a displacement successful that structure.

"Revenue from products built connected our gen AI models grew astir 800% year-over-year. Our endeavor AI solutions person go our superior maturation operator for Cloud for the archetypal time," Pichai told investors, according to Alphabet's ain capitalist relations transcript.

The connection reflects a meaningful alteration successful however Alphabet's fastest-growing part is generating revenue.

What the Google Cloud maturation numbers really show

The fiscal results enactment the claim. Google Cloud gross grew 63% to conscionable implicit $20 billion, exceeding the $18.05 cardinal analysts had forecast, CNBC reported. Operating income tripled to $6.6 billion, portion conception borderline accrued to 32.9% from 17.8% a twelvemonth earlier.

This maturation has been accordant alternatively than a single-quarter event. Cloud gross maturation has accelerated for 4 consecutive quarters, moving from 32% to 34% to 48% and present to 63%.

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Sustained gross maturation alongside expanding margins is simply a notable combination. Many companies execute accelerated maturation by accepting bladed margins successful speech for scale.

Achieving some simultaneously typically indicates that underlying demand, alternatively than spending alone, is driving the results.

Why the backlog fig matters much than the 800% headline

The fig that drew the astir attraction from analysts was not Google's AI gross maturation rate. It was the backlog. Cloud backlog astir doubled 4th implicit 4th to much than $460 billion, up from astir $155 cardinal 2 quarters earlier. Management expects conscionable implicit fractional of that backlog to person into recognized gross wrong 24 months.

A backlog of that size reflects signed commitments alternatively than speculative interest. Pichai noted aggregate billion-dollar-plus deals closed during the quarter, and said the fig of deals successful the $100 cardinal to $1 cardinal scope has doubled twelvemonth implicit year.

Gemini Enterprise's paid monthly progressive users grew 40% 4th implicit quarter, and existing customers expanded spending 45% beyond their archetypal commitments.

That past fig is significant. When customers summation usage beyond their archetypal contracts, it indicates the merchandise is being actively utilized alternatively than purchased and near unused.