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Of the four hyperscalers reporting Wednesday, Alphabet was the cleanest beat. Cloud growth was strong, capex went up again, and the company confirmed something investors have been waiting on for months: it will sell its custom AI chips to other customers.
Alphabet stock rose more than 3% on Wednesday and traded up another 7% in overnight trading.
Alphabet reported Q1 EPS of $5.11 versus a $2.62 estimate, and revenue of $109.9 billion versus $107.1 billion expected. The prior year delivered $2.81 EPS on $90.23 billion in revenue.
Google Advertising revenue topped $77.2 billion, ahead of the $76.2 billion estimate. YouTube ad revenue came in at $9.88 billion.
The cloud line is what most investors are watching. Google Cloud revenue hit $20.03 billion versus an $18.4 billion estimate. The backlog, which is contracted future revenue, nearly doubled in the quarter to more than $460 billion.
Alphabet raised its full-year capex range to between $180 billion and $190 billion, up from a prior $175 billion to $185 billion. That is the third hyperscaler this earnings season to push capex higher, alongside Meta and Microsoft.
The company also said Gemini Enterprise grew paid monthly active users by 40% quarter over quarter, and that its first-party models are now processing more than 16 billion tokens per minute, a 60% increase from the prior quarter. Tokens are the basic units AI models use to process language, so token throughput is a measure of how much real workload the models are handling.
Alphabet announced two new AI chips at its Google Cloud Next 2026 conference last week, the TPU 8t and TPU 8i. On Wednesday it said it will begin selling its custom TPUs to select third-party customers for use in their own data centers.
That puts Alphabet in more direct competition with Nvidia and AMD, both of which currently supply the GPUs underneath most of the AI build-out. It also follows Alphabet's earlier deal with Anthropic and Broadcom to provide the AI startup with multiple gigawatts of TPU capacity, with the first processors coming online next year.
Morgan Stanley analyst Brian Nowak wrote that the third-party TPU business "is not priced into the stock" and could be a meaningful 2027 driver for Alphabet.
Alphabet stock has climbed roughly 30% over the past six months, the best of the four hyperscalers. Amazon is up 15%. Microsoft is off about 20%. The next data point is how quickly Alphabet ramps third-party TPU shipments and whether early customers move volume away from Nvidia.
