Google Cloud Grows 103% with $30.7B Revenue in Quarter

Alphabet reported on Wednesday (28) revenues of $127.6 billion in the third quarter of 2026, a 25% increase from the same period last year, according to the company’s earnings release. The standout was Google Cloud: $30.7 billion in revenue, a growth of 103% over the past twelve months.

The profit line told a different story. The earnings per share of $2.12 fell well short of analysts’ estimate of around $3.01, according to TheStreet and Investing.com, with the shortfall primarily attributed to non-operating losses. Consolidated operating income, on the other hand, rose by 30% to $40.6 billion.

TPU Becomes Revenue Stream

The release cites sales of TPU systems, the AI chips designed by Google itself, as a significant contributor to Cloud's growth. The shift is not just one of scale, but of nature: Google is moving from using TPUs solely as an internal cost advantage to selling them as systems, competing directly for budgets currently spent on Nvidia.

Profitability kept pace. Operating income from Cloud reached $11.1 billion in the quarter, with a margin of about 36%, according to highlights from the conference call published by Yahoo Finance and Converge Digest. The Cloud's contract portfolio totaled $561 billion.

When placed alongside the earnings released by Microsoft on the same day, the number gains context. Azure brought in $33.17 billion in the quarter, growing by 48%. Google Cloud, at $30.7 billion, is less than $2.5 billion away, growing more than double the rate. The two companies do not define segments in the same way, and the direct comparison is imperfect, but the difference in speed is too great to be explained solely by accounting criteria.

The Capex Calculation

Alphabet invested $51.4 billion in capital during the quarter, primarily in technical infrastructure for AI, and is working within a range of $195 billion to $205 billion for the year 2026. This is more than Microsoft, which has reduced its calendar year projection to about $170 billion.

This is the argument from those who see excess. An earnings per share figure about 30% below expectations, in a quarter of record revenue, fuels the thesis that the investment cycle in AI is consuming profits before returning them. The counter-argument lies within Cloud itself: an operating margin above 35% in a business that has doubled in size in a year is the opposite of a lab burning through investor cash. Alphabet finances its capex through search and advertising revenue, and Cloud is already covering an increasing part of the bill.

Gemini, according to the company, reached 1 billion users. On the same day, Google DeepMind announced Gemini 4 Carbon, with initial access restricted to cybersecurity teams, two weeks after Gemini 4 Argon.

What Changes for Corporate Buyers

In the United States, selling TPUs as systems opens a second source of capacity for those training and serving models at scale, at a time when Microsoft itself has reported delays in delivering contracted third-party capacity. For CIOs negotiating cloud contracts, having an alternative with the provider's own hardware changes the negotiation table, although migrating workloads from GPU to TPU requires rewriting parts of the code.

In Europe, the $561 billion portfolio coexists with pressures for data sovereignty. In Germany, Google operates a sovereign cloud in partnership with T-Systems, and it is through this type of arrangement that German banks and public entities access the same infrastructure now growing at 103%.

In Brazil, the São Paulo region of Google Cloud is the entry point for customers needing to keep data in the country, such as banks subject to the Central Bank's cloud regulations. The question for these clients is whether TPU capacity and the latest Gemini models reach regions outside the United States at the same pace; the earnings report does not provide geographic revenue breakdowns for Cloud to answer this.

The earnings report also shifts the question the market is asking about AI. The debate has moved from whether revenue will appear; it has appeared, with Cloud doubling. The question now is how long Cloud's margin sustains a capex that has already surpassed $50 billion per quarter, and this number will only be reflected in 2027 earnings reports.