AI Builds the Cloud That Built Google Cloud into Alphabet Inc.’s Strongest Growth Engine

31 October 2025

People walk next to the Google Cloud logo, during the 2025 Mobile World Congress (MWC) in Barcelona, Spain, March 4, 2025. REUTERS/Albert Gea

Once dismissed as a laggard in the cloud race, Google Cloud has blossomed into one of Alphabet’s fastest-growing and most pivotal divisions, largely fueled by a bold bet on artificial intelligence (AI) infrastructure and services. According to fresh filings and executive commentary, the unit generated over $15 billion in revenue in the third quarter of 2025 a 34 percent year-on-year increase anchored by surging demand for AI compute, including development around Gemini, the company’s in-house large language model.

Under the leadership of Thomas Kurian, who joined in 2018 from Oracle and spearheaded a wholesale transformation of the group, Google Cloud’s market share climbed from approximately 7 percent in 2018 to an estimated 13 percent in 2025 (per Synergy Research). Once hobbled by internal resistance employees recall pitched battles for enterprise contracts and a culture that prioritized ad revenue over competition the unit’s turn-around involved recalibrating its strategy around the enterprise buyer, aligning its sales motions by industry rather than geography, and broadening its chip inventory to include Alphabet’s own TPUs.

The seismic shift within Google Cloud reflects a broader strategic pivot at Alphabet. When Sundar Pichai became CEO of Alphabet in 2019, he identified YouTube and Google Cloud as twin pillars for growth beyond search advertising. While YouTube delivered steady results, Cloud only turned profitable in 2023 after years of heavy infrastructure investment. Everyone’s attention now is fixed on this newly primed segment because Cloud is no longer just another division it’s a spearhead in the AI-driven future Alphabet foresees.

At the heart of the ascent lies compute. Alphabet opened the door for Google Cloud to sell its proprietary TPUs tensor processing units broadly, rather than restricting them for internal use. That decision unlocked meaningful adoption: AI labs that once leaned exclusively on Nvidia-based GPUs are now partnering with Google for scale alternatives. One deal alone: Anthropic committed to using as many as one million TPUs in a multi-year agreement worth tens of billions. These moves underpin a thesis that Google Cloud is building for the AI “arms race,” equipping enterprises with both infrastructure and AI stacks.

Yet the growth has not been without cost. Alphabet raised its projected 2025 capital spending to between $91 billion and $93 billion, an explicit recognition of the scale and cost of its cloud and AI ambitions. These numbers signal that Google Cloud’s advantage may be rooted as much in sheer financial leverage as in technical prowess. Wall Street has taken note both as investor enthusiasm and caution around whether this capital will deliver commensurate returns.

Internally, the ascendancy of Google Cloud is shifting power dynamics across Alphabet. Sources say Kurian now exerts significant influence in the weekly leadership meetings, often at the table with the division heads that traditionally competed for resources and visibility. Pichai publicly called Cloud “one of the most important priorities for Alphabet as a whole.” For a company long known for ad-tech dominance, this marks a symbolic and structural shift toward infrastructure-led growth.

From an industry vantage point the implications are broad. Google Cloud’s pivot shows that AI globalization is increasingly tethered to massive compute platforms rather than apps alone. It also signals that the division may be poised to challenge the entrenched duopoly of Amazon Web Services and Microsoft Azure both of which hold higher market shares but now face renewed competition. Analysts at Goldman Sachs suggest the three major clouds are “on roughly equal footing,” a striking turn for Google from just a few years ago.

But the road ahead will require execution. Despite the strong topline growth, keeping margins healthy while churning through infrastructure costs remains a core test. The unit is still smaller than its primary rivals and bears the outsized burden of Alphabet’s elevated capital and operational spend. The bigger question for investors and the tech sector is whether the size of the machine will translate into a lasting competitive edge.

In the final analysis, Google Cloud’s transformation is emblematic of the larger AI story: computing power is becoming the new competitive frontier, and companies that can marry infrastructure with software stand to win. For Alphabet, Google Cloud no longer occupies the backbench it has stepped into the frontline of the company’s next chapter.