Google Cloud Surges 63% as All Three Major Cloud Providers Beat Earnings Estimates

All three top cloud infrastructure providers surpassed analyst estimates in earnings reports late Wednesday, but Google was the standout, generating its fastest growth rate on record. Google is chasing Amazon Web Services and Microsoft Azure in the public cloud market, which is booming as demand soars for access to artificial intelligence models and services. All three vendors provide a suite of tools for building and running companies' products, and they also offer an array of their own AI models and specialized hardware. "Wow, that was some quarter," Synergy Research analyst John Dinsdale said in an email after the results were released. His firm estimated that cloud infrastructure spending reached $129 billion in the period. "Our forecasts point to sustained strong growth in the years ahead, with AI continuing to drive usage, unlock new use cases, and boost cloud provider revenues," Dinsdale said in Synergy's update. Google Cloud, which includes infrastructure and corporate productivity apps, saw revenue shoot up 63% to $20.03 billion, surpassing StreetAccount's consensus of $18.05 billion. That's by far the strongest rate of growth for any period since Google started breaking out cloud results in 2020. In addition to offering a full infrastructure suite for AI workloads, Google is firmly competing with OpenAI and Anthropic in the market for AI models, as Gemini continues to gain adoption. The company is also seeing accelerating growth from its homegrown tensor processing units (TPUs), which are emerging as an alternative to Nvidia's graphics processing units (GPUs). "Our enterprise AI solutions have become our primary growth driver for cloud for the first time," Alphabet CEO Sundar Pichai said on that company's Wednesday webcast with analysts. Revenue from products built with Google generative AI models grew 800%, Pichai said. Shares of Google parent Alphabet jumped about 7% on Thursday, while Amazon and Microsoft were trading lower. AWS, which leads the cloud infrastructure market, increased revenue by 28% to $37.6 billion. The consensus among analysts polled by StreetAccount was nearly $1 billion lower. AWS customer spending on the Bedrock service for building AI agents and applications jumped 170% from the fourth quarter, eating up more tokens in the first quarter than in its history dating to 2023, Amazon CEO Andy Jassy said on his company's earnings call. The results came a day after AWS said OpenAI models will come to Bedrock, and a new Bedrock service will enable clients to build sophisticated agents integrated with their existing infrastructure. "OpenAI has said they're already seeing unprecedented demand for this new product, and we're seeing heavy customer interest as well," Jassy said. Microsoft, the second-largest cloud supplier, reported 40% growth in Azure and other cloud services, topping the 39.3% and 38.8% estimates from StreetAccount and CNBC, respectively. Management sees second-quarter Azure growth of 39% (40% at constant currency), above StreetAccount's 37% consensus. Microsoft CEO Satya Nadella said on the call that the number of customers that adopted Anthropic and OpenAI models through his company's platform doubled from the prior quarter. Expansion for all three companies is coming at a hefty price, as they told investors they collectively expect to shell out close to $600 billion this year on capital expenditures. There's also competition emerging from smaller so-called neocloud providers. That group, which includes companies like CoreWeave and Nebius , has obtained 5% of the cloud market, Dinsdale said. WATCH: 'Fast Money' traders react to Alphabet's earnings beat, strong cloud growth