By Adam Levine
Alphabet reported strong first-quarter results on Wednesday afternoon. Its shares were rising in after-hours trading.
Earnings per share were $5.11, well ahead of Wall Street's consensus estimate of $2.63, and up from $2.81 last year. Revenue for the quarter reached $110 billion, more than expectations of $107 billion, and up 22% on the year.
The stock was up 5.7% in after-hours trading following the report.
The most closely watched line in Google's reporting is its cloud unit which will spend up to $190 billion on AI data centers this year, just raised from $185 billion on the earnings call, to support its customers that rent AI servers over the internet. Quarterly cloud sales hit $20 billion, up 63% with a 33% operating profit margin. Despite mounting depreciation expenses, Google Cloud's margin is rising quickly.
Google Cloud's backlog nearly doubled from a quarter ago, hitting $462 billion at the end of the period.
Google Cloud sales are important to justify the company's huge capital costs. Alphabet's capex is on pace for its 2026 guidance, hitting almost $36 billion in the first quarter, doubling last year's spend.
"We are seeing unprecedented internal and external demand for AI compute resources," chief financial officer Anat Ashkenazi said on the earnings call. "The investments we are making in AI is delivering strong growth, as evidenced by the record revenue and backlog growth in Google Cloud and strong performance in Google services."
There is already a significant impact on the company's cash-flow statement. Free cash flow fell to $10 billion, and Alphabet bought back no shares in the quarter.
The company netted about $30 billion from debt sales, bringing long-term debt to $77.5 billion, in addition to another $13 billion in lease liabilities.
Advertising remains Google's core business, at 70% of revenue. Sales were up 16% here with the search franchise leading the way at 19% growth. This was offset by the continued shrinking of the third-party ad network, down 4%.
This is breaking news. Read a preview of Alphabet's earnings below and check back for more analysis soon.
Alphabet comes into its first-quarter earnings with a balancing act to maintain. It has committed to a massive 2026 artificial-intelligence capital expenditure program of up to $185 billion, intended both for its own use and to rent out in its Google Cloud segment.
So far, Google's outsize investments have borne fruit: last quarter, cloud-unit sales were up 48% from the year before, with 154% operating profit growth. But spending commitments that large mean that Google has to prove the bet is still working every quarter.
"We've been supply constrained even as we've been ramping up our capacity," said CEO Sundar Pichai during the recent fourth-quarter earnings call. "Obviously, our capex spend this year is an eye towards the future."
The company reports earnings Wednesday after the markets close, and Wall Street analysts polled by FactSet expect cloud segment sales to rise by 47% from last year, with operating income expanding by 120%. Overall revenue is seen at $107 billion, up by 19%.
Expectations are for earnings-per-share to have fallen in the first quarter to $2.63 from last year. But that's due to a difficult comparison with 2025, in which the company received an unusually large 62 cents per-share noncash benefit from the fair-value rise in Alphabet's venture capital investments.
While cloud is what's driving sales growth, the core of Google is its ad sales, still expected to be 71% of revenue in the first quarter, up 14% on the year to $76 billion. Google Search and YouTube lead the charge here, offset by the company's shrinking third-party ad network business.
Write to Adam Levine at adam.levine@barrons.com
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(END) Dow Jones Newswires
April 29, 2026 17:26 ET (21:26 GMT)
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