Alphabet Inc. reported high demand for its cloud and artificial intelligence offerings, boosting shares and giving investors confidence that its unprecedented investments in AI infrastructure will pay off.
Google's parent company said first-quarter revenue, excluding partner payouts, was $94.7 billion, compared with the $91.6 billion expected on average by analysts, according to data compiled by Bloomberg. The company reported earnings per share of $5.11, compared with Wall Street's $2.62 estimate.
Alphabet shares gained more than 6% in after-hours trading, after closing at $349.94.
The results quell investors' worries that Google's main line of business — profiting off of answering people's questions in search — would be taken over by rivals in the chatbot age. Instead, the company has charged ahead to transform its search business and benefit from all of its data to build AI models and tools.
Google's cloud business, which only became profitable three years ago, continues to grow quickly, accelerated by demand for AI software and infrastructure. The Gemini chatbot app and enterprise tools are gaining in popularity. And search queries reached an all-time high after Google integrated AI tools, Chief Executive Officer Sundar Pichai said on a call with analysts.
“AI has enhanced search, not killed it,” Andrew Rocco, a strategist at Zacks Investment Research, wrote in an email. “Google has masterfully integrated AI into its search offering.”
The company expects to spend up to $190 billion this year on capital expenditures, up from a previous estimate of $185 billion, which was already double what it spent in 2025, Chief Financial Officer Anat Ashkenazi said, adding that outlays in 2027 will be “significantly” higher.
“These strong results reinforce our conviction to invest the capital required to continue to capture the AI opportunity,” she said.
Google has managed to drive down the cost of answering users' questions with AI, Pichai said, addressing another one of investors' early concerns about the impact that generative AI would have on the company.
Investors are looking at the cloud business for signs about whether demand will continue to grow — which is considered a strong indicator for the pace of the AI boom. Google is locked in a tight race with startups Anthropic PBC and OpenAI to develop AI that can perform on par with humans and sell it to businesses and consumers.
Google's cloud computing unit reported sales of $20 billion, compared with the $18.4 billion analysts' projection. The unit saw a “meaningful acceleration in growth,” driven by demand for its AI software and infrastructure, Google said in a statement. Backlog — the measure of contracted work that hasn't been recorded as revenue yet — nearly doubled from the prior quarter to over $460 billion, the company said.
“We are compute constrained in the near term, and as an example, our cloud revenue would have been higher if we were able to meet the demand,” Pichai said. “We are working through that moment and investing.”
For select customers, Google will start to offer tensor processing units to use in their own data centers — a move which will expand the addressable market, Pichai said on a call with investors. TPUs are one of the best alternatives to Nvidia Corp.'s chips, and have become a coveted resource as companies hunt for computing power to keep up with demand for AI.
Google also saw strong demand for its AI software. The number of paid monthly active users for Gemini Enterprise, a platform for AI agents, rose 40 percent from the previous quarter, Pichai said. The Gemini chatbot for consumers had 750 million users at the end of 2025.
The company also said it would increase its dividend by 5%, resulting in a quarterly cash dividend of 22 cents.
Google has managed to keep consumers in the habit of going to its search page as chatbots from startups such as OpenAI and Anthropic become more popular. The company now delivers AI-generated answers in response to many searches — a shift that has had major implications for how companies that rely on Google traffic make money.
In prior quarters, Alphabet's profit has also been boosted by recording a higher value of its investments in private companies, including SpaceX, which is planning an initial public offering later this year. It's a major investor in Anthropic PBC too. Anthropic said last week that Google will invest up to $40 billion n the startup.
Google's relationship with both companies has also grown competitive: SpaceX now owns xAI, Elon Musk's artificial intelligence and chatbot company. Internally, Google leaders have grown increasingly worried about falling behind Anthropic in AI coding, as the startup's offering, Claude Code, becomes a breakout hit product.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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