As soon as a money-losing backwater, Google Cloud has develop into one in all Alphabet’s fastest-growing companies, powered by huge bets on AI and years of expensive funding in datacenters, customized chips, and networking gear.
Alphabet’s cloud income topped $15 billion within the third quarter, a 34% enhance reflecting sturdy demand for AI infrastructure and companies, together with Google’s personal Gemini mannequin, the corporate introduced Wednesday.
Google Cloud is now difficult YouTube as Alphabet’s No. 2 money generator behind its search advertisements enterprise.
“Google Cloud is among the most essential priorities for Alphabet as a complete and I count on it to play an much more central function as the corporate strikes ahead,” Alphabet CEO Sundar Pichai instructed Reuters in an interview earlier in October.
A lot of the cloud unit’s development may be attributed to the enterprise bets and diplomatic maneuvering of its head Thomas Kurian, who joined Google from Oracle in 2018 and grew the unit’s market share from 7% then to 13% in 2025, in keeping with Synergy Analysis Group, which tracks the cloud trade.
When Pichai changed Google co-founder Larry Web page as CEO in 2019, he recognized Google Cloud and YouTube as his two huge bets to maneuver Alphabet past its core enterprise of search promoting.
Since then, YouTube has largely delivered, turning into the world’s largest video platform with 1 billion hours watched per day.
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In contrast, Google Cloud misplaced billions between 2018 and 2022 resulting from heavy investments in servers, datacenters and chips till it turned its first revenue in 2023.
Now, with generative AI, Alphabet sees an opportunity to shut the hole with rivals Microsoft and Amazon, which maintain 20% and 30% market share respectively.
Making Google Cloud a contender has come at a value: Alphabet has already shocked Wall Road twice throughout quarterly earnings this 12 months by proclaiming higher-than-expected capital spending as a result of have to construct extra infrastructure to satisfy cloud demand.
“That is the second Google Cloud was ready for,” Dave McCarthy, who directs protection of the cloud trade for analysis agency IDC. “Quite a lot of the long run development at Alphabet is being checked out by its potential.”
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In unique interviews with Reuters, senior Alphabet executives mapped out the gameplan that reworked the also-ran right into a development driver: a cultural shift to a extra customer-driven gross sales method; altering the way it labored with rivals; and a renewed give attention to delivering earnings.
‘Get out of right here, child’
Again when Kurian joined Alphabet, Google Cloud struggled to win enterprise prospects, in contrast to the advertisements aspect of the enterprise which was coping with the most important firms on this planet.
“We might go to the advertisements staff asking, ‘Hey, are you able to assist us out with this buyer?’ And they’d principally be like, ‘Get out of right here, child,’” stated Josh Gwyther, a startup founder who labored at Google Cloud from 2016 to 2025.
That’s not an issue anymore: Google’s scope of AI choices have introduced it into conversations with massive firms that beforehand solely thought of Amazon and Microsoft.
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“The advertisements enterprise is extraordinarily wholesome, but it surely’s not going to develop on the tempo that we’re,” stated Matt Renner, Google Cloud’s president of worldwide income.
9 of the ten main AI labs at the moment are prospects, Kurian stated at an trade convention in September. They embrace OpenAI, Anthropic and Protected Superintelligence. Particulars of Google’s offers with had been first reported by Reuters earlier this 12 months.
To get there, Kurian took a mallet to conventional practices, changing it with what a number of workers known as an “un-Googley” tradition.
Kurian, who left a job as one in all Larry Ellison’s highest-paid lieutenants at Oracle, introduced monetary self-discipline to Google’s “loosely-run, ground-up tradition” that inspired aspect initiatives and experimentation, stated Chirag Mehta, a tech analyst who labored at Google Cloud from 2017 to 2021.
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To slash prices, Kurian opened new places of work in cheaper places, resembling North Carolina and Poland. He audited Google Cloud’s contracts for inside companies and renegotiated these the place he deemed his unit was being overcharged by different departments, as was first reported in The Info.
He has ordered workers to give attention to income fairly than bookings. Google Cloud additionally shifted its gross sales technique to focus on prospects by sector fairly than geography. That helped cut back gross sales reps being assigned accounts in industries the place they lacked specialised data, stated Renner.
Its give attention to generative AI has allowed it to meet up with rivals Microsoft and Amazon from a technical standpoint, in keeping with some analysts.
“We imagine that the three clouds competitively are on roughly equal footing,” stated Goldman Sachs managing director Eric Sheridan. “That’s a really completely different aggressive positioning for Google Cloud now than two or three years in the past.”
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Working with the enemy
For years, Alphabet had reserved the lion’s share of its personal chips, or TPUs, for in-house use solely. That modified in 2022, when Kurian efficiently lobbied to maneuver the group promoting TPUs from Google’s core engineering unit into Google Cloud
That transfer drastically elevated Google Cloud’s allocation of TPUs as a result of the unit may now freely supply the chips fairly than having to obtain approval from one other a part of the corporate, in keeping with two individuals accustomed to the transfer.
At a time when the world was scrambling for compute, Alphabet made the choice to make its chips accessible to not simply its personal DeepMind AI unit, but in addition to its rivals.
That call stoked tensions internally, in keeping with former workers of each models, but it surely gave Kurian a stronger gross sales pitch for courting prospects.
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“We’re the one hyperscaler with each silicon and fashions of our personal,” he stated. “How deep is your technical differentiation when the identical stuff that you simply’re reselling may be purchased from any individual else?” Google Cloud rapidly leveraged the chance to petition Anthropic to check TPUs as a viable various to Nvidia’s GPUs, in keeping with a former Google Cloud government concerned within the partnership.
By 2024, Anthropic had seen sufficient to deploy Alphabet’s TPUs at scale. In October, it expanded its take care of Google to make use of as many as a million TPUs, price tens of billions of {dollars}. The startup, which is now valued at $183 billion, has additionally tapped Amazon for chips because it reduces its dependency on Nvidia, which controls about 80% of the AI chip market.
“The entire world was form of on GPUs, OpenAI specifically,” stated Dan Rosenthal, who manages Anthropic’s partnerships with Google and Amazon. The necessity for chips “pushed us to be extra versatile,” he stated.
Different AI builders together with Apple and Protected Superintelligence have since adopted Alphabet’s TPUs. Pichai instructed analysts on an earnings convention name this week that Alphabet is “investing in TPU capability to fulfill the super demand we’re seeing from prospects and companions.”
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And though Google Cloud launched an enterprise model of its flagship mannequin Gemini in October, Kurian instructed Reuters he would welcome including OpenAI’s household of enterprise fashions to Google Cloud if the ChatGPT maker was .
Energy shift
The ascent of Google Cloud is shifting the steadiness of energy inside Alphabet. Present and former executives instructed Reuters Kurian has gained clout at Google’s weekly “leads,” the agenda-setting conferences the place division leaders jostle over assets and priorities.
“What Thomas has been a robust voice for is ensuring that after we say we’re specializing in the consumer, that we’re specializing in the enterprise buyer too,” Pichai stated.
It nonetheless has a protracted technique to meet up with its rivals and will probably be costly to get there. In July, Pichai hiked Alphabet’s projected capital spending for 2025 by $10 billion to $85 billion. This week, he raised the projection once more to between $91 billion and $93 billion, including that 2026 was prone to run a fair bigger invoice.
With considerations over an AI bubble rising, Pichai instructed Reuters that he expects Google Cloud’s enterprise to have “quite a lot of resilience” towards short-term market corrections. “From our standpoint, we’ve been doing the AI factor for a decade now, and we’re going to be doing it a decade from now.”