Alphabet (GOOGL.US) delivered impressive financial results for the first quarter of 2026 after market close on Wednesday, April 29. The company achieved stronger-than-expected performance in both revenue and profit. Total revenue rose to $109.9 billion, a 22% year-over-year increase, significantly surpassing market expectations of $107.2 billion.
Net profit surged 81% to $62.6 billion, compared to $34.5 billion in the same period last year. This substantial growth was attributed to improved operational efficiency and $37.7 billion in non-operating income, primarily from unrealized gains on investments in private companies. Diluted earnings per share (EPS) reached $5.11, an 82% increase from $2.81 per share a year ago, far exceeding the analyst consensus range of $2.63 to $2.68. The consolidated operating margin expanded from 33.9% to 36.1%.
The standout performer was Google Cloud, which officially entered a phase of mature profitability. Its quarterly revenue reached the $20 billion milestone for the first time, growing 63.4% year-over-year from $12.26 billion. The segment's operating profit also experienced a leap, soaring to $6.6 billion from $2.18 billion a year earlier, with its operating margin significantly improving from 17.8% to 32.9%. Market analysis indicates this explosive growth was fueled by strong enterprise demand for generative AI infrastructure and custom TPU chips. Prospectively, the company disclosed that its cloud backlog nearly doubled to $462 billion from approximately $240 billion last quarter, demonstrating strong commercial appeal and customer stickiness for its AI solutions in long-cycle markets.
In its traditional core business, the Google Services segment showed steady performance, with total revenue reaching $89.6 billion, a 16% increase. Revenue from core Search and other related businesses grew 19.1% to $60.4 billion, hitting a new historical high in query volume. CEO Sundar Pichai highlighted that the deep integration of the AI-powered search experience (AI Overviews) has significantly boosted user engagement and frequency of use. Meanwhile, YouTube advertising revenue contributed $9.88 billion, up 10.7%. Revenue from the segment encompassing subscriptions, platforms, and devices grew 19.3% to $12.38 billion, with the total number of paid subscribers reaching 350 million. These figures indicate that while aggressively pursuing AI innovation, Google's traditional advertising and subscription ecosystems maintain strong defensive moats.
Facing substantial capital expenditure requirements, Alphabet demonstrated a prudent yet ambitious balancing strategy, coupled with generous returns to shareholders. Capital expenditures for the quarter were $35.67 billion, primarily directed towards building next-generation AI data centers and underlying computing hardware. The company reaffirmed its full-year 2026 capital expenditure guidance of between $175 billion and $185 billion, hinting it could potentially reach $190 billion. To reward investors, the board announced a 5% increase in the quarterly dividend to $0.22 per share and authorized a new stock repurchase program of up to $70 billion.
Ahead of the earnings release, Google further solidified its leading position by making an additional $40 billion investment in Anthropic and unveiling its eighth-generation TPU. TPUs are considered one of the top alternatives to NVIDIA's chips and have become a highly sought-after resource as companies race to secure computing power for AI needs. CEO Sundar Pichai stated on the investor call that Google will begin offering Tensor Processing Units (TPUs) to certain customers for use in their own data centers, a move that expands the potential market.
In recent quarters, Alphabet's profits have also benefited from mark-to-market gains on its equity investments in private companies, including SpaceX, which is planning an initial public offering later this year. Alphabet is also a major investor in Anthropic PBC, which announced last week it would receive a new round of funding from Google totaling up to $40 billion. However, these heavily-backed companies are increasingly forming a complex coopetition dynamic with Google. SpaceX now owns Elon Musk's AI and chatbot company xAI, posing a direct threat to Google's core territories. Internally, Google's leadership is growing concerned that the company is falling behind in the critical field of AI programming, as Anthropic's Claude Code has suddenly become a breakout phenomenon—a competitor that Google itself helped nurture.
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