Key Points
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Google Cloud revenue grew 82% in the second quarter, a sharp acceleration.
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Both Amazon and Microsoft are expected to report significantly lower cloud growth rates.
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If they can surprise the market with their cloud growth, it could go a long way toward investor confidence.
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Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) just reported excellent second-quarter results, especially for Google Cloud. The tech giant’s cloud revenue soared by 82% year-over-year, making it by far the fastest-growing part of the business.
The other two massive cloud infrastructure providers, Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT), which operate AWS and Azure, respectively, report earnings later this week. And Google Cloud’s stellar performance makes it extremely important for its rivals to show impressive results of their own.
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Google Cloud’s incredible momentum
Google Cloud revenue reached $24.8 billion in the second quarter. The 82% year-over-year growth rate was a sequential acceleration from the 63% growth rate reported in the first quarter and the 48% growth rate in the fourth quarter of 2025.
Not only was the top-line growth impressive, but Google Cloud is getting even more profitable. Operating income from the Cloud business reached $8.8 billion — that’s roughly three times what it produced a year ago.
Alphabet raised its capex forecast to $195 billion to $205 billion for the full year, causing the stock to pull back slightly despite generally excellent results. But it’s fair to say that the rapid acceleration in Google Cloud’s growth shows that the company is (at least for now) seeing a strong return on its aggressive spending.
Why Amazon and Microsoft investors should take notice
Google Cloud has the third-largest cloud services market share, behind Amazon’s AWS and Microsoft’s Azure. But those two aren’t growing at 82% year-over-year, at least not yet.
In the first quarter, industry leader AWS reported 28% year-over-year revenue growth, while Microsoft reported 40% growth in its Azure business. Many analysts expect AWS to show actual growth of slightly more than 30% in the second quarter, with Microsoft’s management providing Azure revenue growth guidance in the 39%-40% range.
Both Amazon and Microsoft are also spending hundreds of billions of dollars on capex, primarily to build out data centers and other AI infrastructure. And investors want to see that they’re getting a strong return on this spending, as it’s not only consuming all of their free cash flow, but is creating a need to spend cash and take on debt.
For that reason, growth of cloud revenue is likely to make-or-break the market’s reaction to both of these companies’ earnings reports. If Amazon and/or Microsoft can report better-than-expected cloud growth, especially if they do so without raising capex more than expected, it would go a long way toward boosting investor confidence.
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Matt Frankel, CFP® has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.
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