The stock market liked the Q1 update Alphabet (NASDAQ:GOOG) released on Wednesday (29 April). And in fairness, it was exceptional.

Both revenues and profits grew significantly. But the real highlight for investors was the growth in the artificial intelligence (AI) division.

Growth

Alphabet’s overall revenues in the first quarter of 2026 grew 22%. That’s a big number, but earnings per share increased by a massive 82%.

Part of that was due to a revaluation in some of the firm’s investments. But operating income – which excludes this – was still up 30%. 

There’s nothing to dislike there. Beneath the surface, however, the real highlight was the firm’s Google Cloud division, which grew 63%. 

That matters for a couple of reasons. One is that it means Alphabet’s cloud computing division is growing faster than Amazon or Microsoft.

The other is that it goes a long way towards justifying the ongoing investments in data centres. It’s a sign that – at least for now – there’s real demand.

Alphabet’s results were terrific. But with the share price now up 131% in 12 months, is it too late to consider buying?

Google Cloud

Google Cloud’s 63% growth is hugely impressive. It’s well ahead of the 28% that Amazon’s AWS achieved in the same quarter. 

Investors should note, though, that this is partly a function of size. It’s not the result of Alphabet’s unit generating higher revenues. 

In terms of sales, AWS added $8.32bn while Alphabet’s unit added $7.8bn. That amounts to a different growth rate because Google Cloud is smaller.

I think that’s important for investors. It doesn’t suggest to me that customers are choosing Alphabet over Amazon – at least, not yet. 

As I see it, the latest results indicate that both are doing well. It’s just that AWS is a bigger business and this is what leads to higher growth rates.

To some extent, that doesn’t matter – Google Cloud has more market share available to win. But I think it’s worth keeping in mind for investors.

What’s coming next?

Alphabet announced that it’s planning on increasing its spending to between $180bn and $190bn this year. And it’s expecting this to be a lot higher in 2027.

That’s not as much as Amazon. But it’s a lot in the context of a cloud division with significantly lower quarterly sales.

Investors had been viewing this with suspicion. Strong demand for computing power, however, seems to have alleviated those concerns.

That makes sense. It does, however, offer a marked contrast to the way the stock market is viewing software companies at the moment. Several software firms have been reporting strong earnings. But they don’t seem to be able to do anything to convince investors that their growth is durable.

I think it’s worth keeping something similar in mind with Alphabet. The latest update is very strong, but one report doesn’t make an investment thesis.

Opportunity missed?

Its results are outstanding and it’s no surprise to see the stock rising. Right now though, I don’t think it’s the most obvious cloud computing stock. 

With its antitrust issues of last year now well behind it, the business looks very attractive. But at today’s prices, I’m looking at other opportunities in this space.