Alphabet's Google Cloud business has seen a strong first quarter of 2025, with revenue increasing 28 percent year over year (YoY).
Revenue for the overall company was $90.2bn, up 12 percent YoY but less than Q4 2024's $96.5bn. Google Cloud contributed $12.3 billion to the latest quarter, just above the $12bn recorded in Q4 2024.
The cloud business' margins came in at 17.8 percent, significantly up from the previous year, which saw margins of just 9.4 percent. The previous quarter's operating margin was 17.5 percent.
Google and Alphabet CEO, Sundar Pichai, said in his remarks: "Our differentiated, full-stack approach to AI continues to be central to our growth. This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance, and it’s widely recognized as the best model in the industry. That’s an extraordinary foundation for our future innovation. And we are focused on bringing this to people and customers everywhere."
He further drew attention to the company's AI infrastructure, stating that the company now has more than two million miles of fiber and 33 subsea cables, and claimed Google to have the "industry's widest range of TPUs and GPUs."
The quarter saw Google announcing its seventh-generation in-house developed TPU, Ironwood, which is designed for inference at scale and delivers more than a 10x improvement in compute power over the sixth-generation TPU.
Pichai further claimed that Google was "The first cloud provider to offer Nvidia’s groundbreaking B200 and GB200 Blackwell GPUs," adding that Google will be offering their next-generation Vera Rubin GPUs.
AI infrastructure represents, as usual, a significant portion of the company's capex.
Capex for the quarter was $17.2 billion, of which the majority went to the cloud computing business, noted CFO Anat Ashkenazi. The largest investment was in servers, followed by data centers.
The company is still expecting to spend $75 billion in the course of the year, though "the investment level may fluctuate from quarter to quarter due to the impact of changes in the timing of deliveries and construction schedules," said Ashkenazi.
Google is thus far the only one of the Big Three to escape reports about withdrawal from data center projects. Both Amazon and Microsoft have faced speculation about canceled leases, though have similarly put this down to normal strategic business changes.
Ashkenazi said that, in cloud, "We are in a tight demand supply environment, and given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth depending on capacity deployment each quarter," adding that she expects "relatively higher capacity deployment" towards the end of the year. Google is one of the companies slated to take over Microsoft leases.
Ashkenazi further noted that the company has seen around a 31 percent increase YoY in depreciation this quarter, and expects this to go higher throughout the year. "Think about that as a headwind we have to manage against," she said, "but we are pushing across the organization, leveraging, as Sundar said, the use of AI and AI-first Google across several of our functions to help us manage a larger scope of work."
Google's chief business officer, Philipp Schindler, noted that the company was not immune to the current macroeconomic uncertainties caused by President Donald Trump's tariff policies, though suggested this would mainly impact the company's advertising business regarding Asia-based retailers.
Other challenges facing Alphabet as a whole include the two ongoing antitrust investigations relating to its advertising and search businesses, spearheaded by the US Department of Justice. Thus far, both have been decided in the government's favor, with a trial ongoing to determine the penalties faced by Google.
This could include demanding a breakup of the company, or requiring Google to share its search and ad indexes with competitors, both of which would impact the business significantly. OpenAI is reportedly interested in acquiring Google's search business should a breakup occur.
Following the earnings call, Alphabet shares jumped 4 percent.
