If a huge cloud compute provider with its own TPUs can't profit in the age of "everybody needs compute for AI like never before OMG" then I dunno who could.
In the gold rush, the shovel salesmen were selling a hell of a lot of shovels.
Google grew revenue 22% YoY and operating income 30%, with growing margins. Search revenue still growing 19%, an acceleration vs YoY growth this time last year.
Cloud grew revenue 63%. Cloud income up from $2.2b Q1’25 to $6.6b Q1’26.
I know for most people that the big surprise here is sustained search ad revenue in the face of AI. But I’m super curious on margins because I thought for sure offering so much free AI inference would be so insanely expensive it harmed margins.
Still no sign of Waymo in Other Bets revenue, which fell from $450M to $411M.
But they're presumably investing more in it, since Other Bets income fell from $-1,226M to $-2,100M, meaning expenditure went up $800M YoY. (Obviously not all of this was Waymo though.)
In the long run, judging from recent incidents such as YouTube monetization suspensions, I do not think Google is good for the consumer web experience or for content creators. I also think SEO search has almost completely broken down.
In particular, the flow that used to support content creators through Google Search has been damaged. Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
That said, I think Search is still making a lot of money because Google is effectively focusing less on informational search and more on commercial search. I mean searches with purchasing intent, such as “best laptop recommendation.” We cannot know the full search-volume statistics from the outside, but in my subjective experience, the quality of actual search results is often much worse than expected.
In that sense, Google’s revenue now feels less like it comes from serving small developers or end users, and more like it comes from selling infrastructure to large companies and major developers. The huge increase in Cloud revenue seems especially important. Google appears to be strong in enterprise AI solutions, and as an AI development platform it seems extremely powerful. My impression is that the center of gravity in AI development platforms is shifting somewhat from Microsoft toward Google.
However, revenue growth does not necessarily mean product quality. Since AI is increasingly absorbing informational search, users may end up using Google mainly for commercial-intent searches. From another angle, that gives Google an incentive to tune its algorithms and layout around purchase-intent queries.
Separately from that, there is a sharp contrast between Google as a development platform for companies and Google as a service experienced by end users. From the end-user perspective, the experience feels worse every day. Search feels poorly maintained. Ads also feel poorly controlled; for example, adult ads may appear to teenagers. Outside the Gemini API, the places where users can actually use Gemini feel fragmented, and the web version of Gemini is difficult to use seriously because of strong token limits.
Google seems to be trying very hard to serve developers who build on top of Google. But separately from that, ordinary users of Google services increasingly feel neglected.
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[ 2.7 ms ] story [ 35.7 ms ] threadDoing something right.
Maybe mass layoffs like Oracle/Meta/Amazon are doing isn't actually a good way to grow a company after all!
In the gold rush, the shovel salesmen were selling a hell of a lot of shovels.
Cloud grew revenue 63%. Cloud income up from $2.2b Q1’25 to $6.6b Q1’26.
https://www.reddit.com/r/stocks/comments/1sza7xi/alphabet_be...
But they're presumably investing more in it, since Other Bets income fell from $-1,226M to $-2,100M, meaning expenditure went up $800M YoY. (Obviously not all of this was Waymo though.)
In particular, the flow that used to support content creators through Google Search has been damaged. Previously, content would appear in Google Search, visitors would come in, and creators could earn revenue through ads, courses, or other products. But now Google can answer directly through AI Overviews, making it harder for content creators to survive independently.
That said, I think Search is still making a lot of money because Google is effectively focusing less on informational search and more on commercial search. I mean searches with purchasing intent, such as “best laptop recommendation.” We cannot know the full search-volume statistics from the outside, but in my subjective experience, the quality of actual search results is often much worse than expected.
In that sense, Google’s revenue now feels less like it comes from serving small developers or end users, and more like it comes from selling infrastructure to large companies and major developers. The huge increase in Cloud revenue seems especially important. Google appears to be strong in enterprise AI solutions, and as an AI development platform it seems extremely powerful. My impression is that the center of gravity in AI development platforms is shifting somewhat from Microsoft toward Google.
However, revenue growth does not necessarily mean product quality. Since AI is increasingly absorbing informational search, users may end up using Google mainly for commercial-intent searches. From another angle, that gives Google an incentive to tune its algorithms and layout around purchase-intent queries.
Separately from that, there is a sharp contrast between Google as a development platform for companies and Google as a service experienced by end users. From the end-user perspective, the experience feels worse every day. Search feels poorly maintained. Ads also feel poorly controlled; for example, adult ads may appear to teenagers. Outside the Gemini API, the places where users can actually use Gemini feel fragmented, and the web version of Gemini is difficult to use seriously because of strong token limits.
Google seems to be trying very hard to serve developers who build on top of Google. But separately from that, ordinary users of Google services increasingly feel neglected.