Google Cloud backlog tops $514B, half due within two years. Capex climbs 100% to $45B as TPU sales ramp. Alpha Score 69/100.
Alphabet’s cloud computing business grew faster last quarter than any period in recent history. Revenue from the segment climbed 82% year over year to $24.8 billion, marking the fifth consecutive quarter of accelerating growth. The run rate now sits at $99 billion.
The company’s backlog for cloud services stood at $514 billion at the end of the quarter, with roughly half expected to convert to revenue over the next two years. Management said existing customers were exceeding their commitments by more than 50%.
Capital expenditure hit nearly $45 billion in the second quarter, up 100% from a year earlier. That pace actually eased slightly from the first quarter’s 107% growth. A large chunk of the spending goes into data centers. Management said 40% of technical infrastructure spend went toward new data centers and networking equipment, with the rest going to servers. Amazon CEO Andy Jassy has said it takes about two years for data center investments to start generating a cash return. Alphabet’s spending cycle suggests a long runway for further cloud revenue gains.
Inventory jumped from $2.4 billion at the end of 2025 to $10 billion by the end of the second quarter. That points to a big step up in sales of Alphabet’s custom TPU accelerators, which management said accounted for a tiny share of cloud revenue in Q2 but could grow quickly in the third quarter.
If cloud revenue grows another 82% in Q3, the segment would bring in $27.6 billion, a run rate of $110.3 billion. But the company’s own backlog and customer expansion suggest a stronger print is possible. Management said customers are exceeding their commitments by more than 50%, and the $514 billion backlog implies annual revenue of $128.5 billion over the next two years from committed contracts alone.
Alphabet’s cloud operating margin came in at 35.6% last quarter. Amazon’s AWS and Microsoft’s Azure both reported operating margins near 40% in their most recent quarters. Alphabet’s margin still has room to expand, though near-term pressure could come from reliance on third-party neoclouds for some capacity.
The company has committed to spend $811 billion over the next four and a half years, mostly on AI infrastructure. That spending exceeds current cash flow, but the backlog and customer demand support the outlay.
At 17.5 times forward earnings, the stock is priced well below the broader technology sector. GOOGL stock page shows a current price of $354.30, down 0.96% on the day, with an Alpha Score of 69 out of 100, labeled Moderate. MSFT stock page and NVDA stock page provide context on peers.
Alphabet’s cloud division is the primary engine for the company’s next growth phase. The numbers from last quarter and the pipeline ahead make the case on their own.
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