Google Cloud, the enterprise AI division of parent company Alphabet, posted an extraordinary first quarter, with revenue surpassing $20 billion for the first time—a 63% jump compared to the same period last year. Despite this impressive performance, investors raised concerns about capacity limitations and how Google prioritizes cloud resource allocation.

In the first quarter of 2026, the company attributed its cloud growth to strong results from the Google Cloud Platform, which expanded at a faster pace than the overall Cloud division’s revenue. (The Cloud unit encompasses a range of services, including infrastructure, data analytics, AI and machine learning tools, and Google Workspace.)

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During Alphabet’s Q1 2026 earnings call on Wednesday, CEO Sundar Pichai told analysts that this growth stemmed from “strong demand” for Gemini Enterprise and its AI offerings. He highlighted increasing demand for infrastructure, particularly TPU hardware and data centers. AI solutions were the primary engine of cloud growth, with products built on Google’s generative AI models surging nearly 800% year-over-year. Google Gemini Enterprise also grew 40% quarter-over-quarter, and AI token usage via its API reached 16 billion tokens per minute, up from 10 billion in the previous quarter.

Pichai noted other cloud milestones, including a doubling of new customer acquisitions year-over-year and a doubling of deal momentum in the $100 million to $1 billion range. The company also signed multiple “billion-dollar-plus” agreements. Additionally, customers exceeded their initial commitments by 45% quarter-over-quarter.

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However, Pichai warned of constraints, revealing that Google Cloud’s backlog had doubled to $462 billion in the quarter. He framed this as a positive, arguing it showed how Google Cloud differs from competitors. “Obviously, we are compute constrained in the near-term,” Pichai said. “For example, our cloud revenue would have been higher if we could meet that demand. We’re working through that moment, and we are investing, but we have a robust, long-range planning framework… we see extraordinary opportunities ahead.” The company expects to clear 50% of the backlog over the next 24 months.

Much of Google Cloud’s revenue potential comes from providing infrastructure via the cloud, and for some customers, direct sales of TPU hardware. Pichai told investors that Google’s approach considers return on capital investment (ROIC), which helps the company continue investing in “cutting edge” technology.