Like many big tech companies, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has had a lackluster year. It’s only up about 7% for the year, but that figure was over 25% at the start of May. Alphabet has slowly sold off and is now losing to the S&P 500 (SNPINDEX: ^GSPC). However, I think that could be coming to an end.
Alphabet reports third-quarter results on Oct. 28, and there could be one piece of information in that report that causes its stock to skyrocket: Google Cloud revenue growth. Google Cloud is the fastest-growing of the three major cloud computing providers by far, and it has a big catalyst that could send its growth rate even higher in the coming months.
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Google Cloud has multiple factors in its favor
During the second quarter, Google Cloud’s revenue growth reached 82%. Considering it was 63% in the first quarter and 48% in fourth-quarter 2025, this marks major acceleration for the platform. It’s also helping the company to pull away from its peers, as Microsoft Azure reported 43% growth during its latest quarter and Amazon Web Services reported 37%. Google Cloud has long been the third-place competitor in terms of market share in the cloud computing industry, but if it keeps up that growth rate, it won’t stay in third for much longer.
Cloud computing platforms are seeing impressive growth due to massive demand from major AI clients. AI workloads cannot be run without the help of cloud computing providers. With each workload being run costing some amount of money, as AI usage rises, so will the revenue of these platforms. That’s why Alphabet made the decision to spend between $195 billion and $205 billion on capital expenditures this year, mostly going toward data centers. Prior-year investments appear to be paying off, which is why Google Cloud’s revenue growth rate is accelerating.
However, generally, workload growth isn’t the only way Alphabet is expanding Google Cloud’s revenue.
One of the differentiating factors between Google Cloud and the competition is its custom-designed Tensor Processing Units (TPUs). TPUs are an alternative to graphics processing units (GPUs). When the workload is properly optimized, they can provide better performance from a cost standpoint than GPUs.
Originally, the only way to gain access to these impressive devices was via Google Cloud. However, Alphabet is starting to sell these computing units to certain clients as another way to generate revenue growth. While there are some sales affecting current results, Alphabet expects the bulk of this revenue to come in 2027, which could boost its cloud revenue growth even further.
