Tech sector investors already knew Google Cloud was growing rapidly, but even most bulls were not prepared for the magnitude of growth that showed up in Alphabet's (GOOG +0.61%) (GOOGL +0.46%) second-quarter results. Cloud revenue surged by 82% year over year, and on the earnings call, CEO Sundar Pichai highlighted the unit's $514 billion backlog.
AI has been a major component of Alphabet's recent success, with nearly 90% of Fortune 100 companies using Gemini Enterprise. Alphabet has long been known for its ubiquitous search engine, but cloud computing may be more important than search in future earnings reports.
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Google Cloud's slice of the pie has gotten much bigger
It wasn't that long ago that Google Cloud accounted for only a small slice of Alphabet's total revenue. Investors waited for the unit's losses to minimize and yearned for the day when Google Cloud would become profitable. Its first profitable quarter arrived in 2023, and now, it's a major part of the business.
NASDAQ: GOOGL
Key Data Points
Google Cloud made up 14% of total revenue in Q2 2025, but its ongoing AI-fueled growth spurt has boosted its share to a little more than 20% of total revenue. Its 82% growth rate and $514 billion backlog are far more exciting figures for investors to consider than Alphabet's 14% year-over-year growth in advertising revenue.
The magnitude of the backlog reflects that demand for cloud capacity is still heating up. Alphabet is sitting on a lot of promised revenue that it still has to realize. It's feasible that Google Cloud could make up more than one-quarter of the company's total revenue next year.
Google Cloud's growing influence also comes at a time when its net operating income more than tripled year over year. The Google services segment, which mostly consists of online ads, only posted a 20% improvement.
It's gaining ground on Amazon and Microsoft
Alphabet is one of the big three cloud infrastructure providers. Amazon (AMZN +0.12%) has the largest market share -- 28% at last report -- and Microsoft (MSFT +3.66%) is in second place with 21%.
However, Google Cloud is growing faster than the other tech giants' offerings. Alphabet currently has a 14% market share, up from 12% as of Q4 2025. If current growth rates hold, it's feasible that Alphabet could claim the silver medal within a few years.
Dethroning Amazon Web Services -- if that's possible -- would take quite a bit longer, since there's such a wide gap between the leader and its peers. While Amazon Web Services' growth has reaccelerated, it's still much slower than Google Cloud's growth rates.
Alphabet's ability to grow faster than the other two cloud providers shows it is more often the preferred choice for existing and new customers that are seeking more AI infrastructure.
Amazon and Microsoft are sitting on market share leads they established long before the AI boom. More recent results point to Google Cloud gaining more market share, and its growth being more impactful than Google Search's on Alphabet's overall financial picture.
