Alphabet reported its Q1 earnings, and the numbers are a direct smackdown to anyone who thought AI chatbots were going to destroy Google Search.
Revenue (excluding partner payouts) came in at $94.7 billion, beating the $91.6 billion analysts were expecting. Earnings per share hit $5.11 — nearly double the $2.62 Wall Street had modeled. The stock jumped over 6% in after-hours trading.
CEO Sundar Pichai said that after integrating AI tools into Search, query volume hit an all-time high, and the cost of serving AI-generated answers has been shrinking. It's the most direct rebuttal yet to the "chatbots will eat Google's lunch" narrative. Not everyone is convinced search is doomed — Parag Agrawal, the former Twitter CEO, is building dedicated web search for AI agents through his startup Parallel Web Systems, which recently raised $100 million at a $2 billion valuation.
Cloud revenue was $20 billion, above the $18.4 billion consensus. Backlog — contracted but not yet recognized revenue — nearly doubled from the prior quarter to over $460 billion. Pichai admitted the company is short on compute, saying cloud revenue "could have been higher." Alphabet is ramping up investment and will let some customers run TPUs (Tensor Processing Units, Google's homegrown alternative to Nvidia chips) in their own data centers. Nvidia isn't the only player in custom AI silicon — Amazon's Trainium chip business, according to CEO Andy Jassy, could be worth $50 billion if spun off.
Gemini Enterprise — the company's AI agent platform for businesses — saw paid monthly active users grow 40% quarter over quarter. On the consumer side, the Gemini chatbot reached 750 million monthly users by the end of 2025.
CFO Anat Ashkenazi said this year's capital expenditure budget is raised to up to $190 billion, up from a prior estimate of $185 billion and already double 2025's actual spending. By 2027, it will be "significantly" higher. The company also announced a 5% dividend increase.