![\"\"](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/05\/5219197.webp.jpeg\")
<\/p>\nGoogle
\nmight have come late to the cloud game and it might be a distant third compared
\nto Amazon Web Services and Microsoft Azure, but Google Cloud is making up for
\nlost time thanks to the killer app that GenAI has become. And while Nvidia is
\nthe dominant full stack player out there when it comes to hardware, which is
\nwhy its revenues and profits have exploded, Nvidia\u2019s Nemotron models are not anywhere
\nas popular as Google Gemini, OpenAI GPT, or Anthropic Claude.<\/p>\n
Here\u2019s
\nthe funny bit. Google never really believed in raw infrastructure clouds. The original
\ncloud services from Google \u2013 Compute Engine and App Engine \u2013 abstracted all of
\nthat infrastructure away to make infrastructure easier, invisible. More like
\nthe Borg and Omega platform that internal Google programmers had access to. And
\ncustomers didn\u2019t care.<\/p>\n
But
\nhere we are, more than a decade later, and IT organizations have learned to stop
\nhugging their physical and virtual servers and they are perfectly happy to use
\nAPIs for Google\u2019s Gemini model as well as to train their models and run their
\ninference against Google\u2019s vast global fleet of GPUs and TPUs. Which is why Google
\nCloud is growing faster than either AWS or Azure in the first quarter. The customers
\nhave finally caught up to the Google vision, and there are customers who are
\nchoosing the full Google stack for the GenAI, from the raw iron up through data
\nservices and inference engines.<\/p>\n
<\/p>\n
Building
\na cloud has not been easy for Google, and it lost a lot of money on it in the
\nearly years, as the chart above shows. But now, Google Cloud is as large as all
\nof Google was a decade ago \u2013 and Google Cloud is more profitable by a factor of
\n1.25X compared to the entirety of Google was back then. It is arguable that
\nGoogle is the best company in the history of IT in terms of building hyperscale
\ninfrastructure and running it efficiently, and that is showing up in the
\noperating income for Google Cloud. It just took a bit of time for Google to get
\nthere and for IT shops to catch up to the culture that the search engine and
\nadvertising giant was peddling.<\/p>\n
The
\nbad news if you are a competitor of Google\u2019s is that the search engine business
\nand the various other advertising businesses at the company (YouTube and
\nnetwork advertising) are collectively doing well. Search revenues were up 19
\npercent to $60.4 billion, YouTube advertising was up 11 percent to $9.9
\nbillion, while network advertising was off 4 percent to $7 billion. The
\nsubscriptions, platforms, and devices business, which includes Pixel phones,
\nYouTube Music, Google One, and other services, rose by 19 percent to $12.4
\nbillion. So, despite all the grief that comes as we use chattybots to do
\nsearches, these businesses are still growing, and growing faster than you might
\nthink possible.<\/p>\n
It
\nis not clear how many subscribers Google has for its flagship Gemini model, but
\nthe company did say that its \u201cfirst party models\u201d \u2013 meaning its own Gemini models
\nserved out as APIs, as well as Lyria, Nano Banana, Veo, and Gemma \u2013 processed
\nan average of 16 billion tokens per minute in the March quarter, up 60 percent from
\n10 billion tokens per minute in the Q4 2025 quarter. By our math and what
\nGoogle said about its averages, that means it processed 917.3 trillion tokens against
\nGemini on behalf of customers in Q3 2025, with 1,310.4 trillion tokens in Q4
\n2025 and 2,050.6 trillion tokens in Q1 2026.<\/p>\n
Presumably This As Google \u201cGoogle
\nthe Google Gemini App division pays Google Cloud for the use of TPUs, just like
\nany other customer does. (Albeit at an attractive price, I suspect.) Google does
\nnot talk about how many tokens it is generating for customers using Nvidia or
\nAMD GPUs. But Sundar Pichai, the company\u2019s chief executive officer, said on a
\ncall with Wall Street analysts that in the past twelve months, 330 customers on
\nGoogle cloud had processed over 1 trillion tokens each, and 35 of these had
\nbroken through the 10 trillion token barrier. The use of the BigQuery tabular
\ndatabase in conjunction with Gemini has grown by 30X in the past year as well
\nas companies see the benefits of a completely unified Google AI stack, from TPU
\nup through Gemini and the
\nGemini Enterprise Agent Platform (an enhanced version of what was formerly known
\nas Vertex AI)<\/a> that wraps around it.<\/p>\n
\nis the driving force for the phenomenal growth that Google saw in its eponymous
\ncloud in the first quarter, and its enormous revenue backlog of $462 billion \u2013 about
\nhalf of which will be recognized within the next two years \u2013 is why Wall Street
\ndid not freak out when Google talked about spending somewhere between $180
\nmillion and $190 million this year on capital expenses. The lack of such a
\nrevenue backlog is why Meta Platforms took a shellacking when it was going to
\nspend on that order of magnitude.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/05\/5219199.webp.jpeg\")
<\/p>\n
\nyou can see, the capex has to rise to keep pace with the backlog, which is not
\ndominated by model builder OpenAI, whose revenue streams and operating losses
\nare something to worry about when you are planning three, four, or five years
\ninto the future.<\/p>\n
\nCloud is finally hitting its stride, and I think part of the reason is that
\nfull stack integration. So does the company\u2019s CEO.<\/p>\n
\nCloud is differentiated because we are the only provider to offer first party
\nsolutions across the entire enterprise AI stack,\u201d Pichai said on the call. \u201cOur
\ngrowth in revenue, operating margin, and backlog highlights this
\ndifferentiation. Our Enterprise AI solutions have become our primary growth
\ndriver for Cloud for the first time. In Q1, revenue from products built on our
\ngen AI models grew nearly 800 percent year over year. We are winning new
\ncustomers faster, with new customer acquisition doubling compared to the same
\nperiod last year. We are seeing strong deal momentum, doubling the number of
\n$100 million to $1 billion deals year on year, and signing multiple billion
\ndollar plus deals. And we are deepening relationships with existing customers.
\nCustomers outpaced their initial commitments by 45 percent, accelerating over
\nlast quarter.\u201d<\/p>\n