Google, Microsoft AI Revenue Rises as OpenAI Misses Targets

Alphabet reported $109.9 billion in revenue for Q1 2026, a 22% increase from a year earlier, driven in large part by Google Cloud, which generated $20.03 billion, up 63% year-over-year and roughly $1.6 billion above analyst estimates.

Alphabet said enterprise AI solutions became its primary growth driver for cloud in Q1. CEO Sundar Pichai said “enterprise AI solutions had become our primary growth driver for cloud for the first time in Q1.” The company raised capital spending guidance for 2026 to $175 billion–$185 billion, up from $91.4 billion in 2025.

Google provided additional commercial metrics: paid monthly active users for Gemini Enterprise increased 40% quarter-over-quarter, the cloud backlog expanded to $460 billion, nearly double the prior quarter, and Gemini 3 Pro, released in November 2025, has driven increased demand across the Cloud stack. Alphabet’s total ad revenue was $77.25 billion, up 15.5% year-over-year; YouTube revenue was $9.88 billion.

Microsoft reported $82.9 billion in revenue for fiscal Q3 2026, an 18% increase year-over-year and above expectations. The company’s AI business surpassed a $37 billion annual revenue run rate, a 123% gain from the prior year. Azure and other cloud services grew 40% year-over-year, and Microsoft Cloud revenue reached $54.5 billion, up 29%.

Copilot, Microsoft’s AI assistant for enterprise, exceeded 20 million paid users, up from 15 million the prior quarter. CEO Satya Nadella described the period as the “agentic computing era.” Microsoft attributed growth to enterprise adoption of AI services and expanded cloud contracts.

OpenAI reported it missed internal targets for both revenue and user growth in recent months. The company’s finance chief, Sarah Friar, warned company leaders that OpenAI could face difficulty funding future compute contracts if revenue does not improve. The shortfall led to share-price declines for several companies tied to AI infrastructure and investment, including Oracle, CoreWeave, SoftBank, Nvidia and AMD.

The quarterly results show differences in revenue sources. Alphabet and Microsoft reported larger enterprise deals and expanding cloud backlogs that coincided with higher revenue and increased capital commitments. OpenAI reported a near-term funding risk tied to compute costs while scaling commercial revenue.

Executives at the larger cloud firms pointed to product releases and partnerships. Google highlighted commercial uptake of Gemini-powered tools and a multiyear agreement with a major device maker to build future foundation models on Gemini. Microsoft emphasized customer adoption of Copilot and broader enterprise use of its AI services.