Amid a slew of very impressive Q3 financial results, Google Cloud has closed more deals of $1 billion or more in the first three quarters of 2025 than it did in all of 2023 and 2024 combined.
That dramatic acceleration by customers choosing Google Cloud as their long-term and deeply strategic partner for AI-focused business transformation is another indication of the enormous momentum Google Cloud has been building as the fastest-growing member of the Cloud Wars Top 10 every quarter for the past two years.
More evidence of the booming enterprise-customer demand for Google Cloud services can be seen in the company’s explosive backlog growth, which in Q3 reached $155 billion (“backlog” represents contracted business not yet recognized as revenue):
- Sequential backlog up 46%: Q2 backlog was $106 billion, meaning that Google Cloud’s backlog soared 46% from Q2 to Q3;
- Year-over-year backlog up 82%: A year ago in Q3 2024, Google Cloud backlog was $85 billion, meaning Google Cloud’s year-over-year backlog shot up 82%.
So, the combination of the dramatic upswing in billion-dollar-plus deals plus the soaring backlog growth indicates that Google Cloud’s overall 34% growth rate for Q3 to $15.2 billion could be a prelude to even more dramatic expansion in the next few quarters.
On Alphabet’s Q3 earnings call, CEO Sundar Pichai pointed to three specific growth drivers for Google Cloud: adding new customers more rapidly, boosting the dollar volumes of engagements, and seeing rapid uptake of AI.
“Our complete enterprise AI product portfolio is accelerating growth in revenue, operating margins, and backlog,” Pichai said of Alphabet’s cloud unit.
“In Q3, customer demand strengthened in three ways:
- “One, we are signing new customers faster. The number of new GCP customers increased by nearly 34% year-over-year.
- “Two, we are signing larger deals. We have signed more deals over $1 billion through Q3 this year than we did in the previous two years combined.
- “Third, we are deepening our relationships. Over 70% of existing Google Cloud customers use our AI products, including Banco BV, Best Buy, and FairPrice Group.”
That rapid AI uptake includes the extremely fast-growing Gemini Enterprise, which after just one month on the market is in use at 700 customers across 2 million seats.
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Potential Speed-Bump
One factor that might stifle Google Cloud’s ongoing growth is the law of physics, which according to my notes is undefeated and unscored-upon. In Google Cloud’s case, that law is coming into play because customer demand for the company’s cloud and AI services are rising faster than Google Cloud can build additional data-center capacity to meet that demand.
Here’s how Alphabet CFO Anat Ashkenazi described the situation during the earnings call:
“As I’ve mentioned on previous earnings calls, while we have been working hard to increase capacity and have improved the pace of server deployments and data center construction, we still expect to remain in a tight demand/supply environment in Q4 and 2026,” Ashkenazi said.
That means that CapEx spending for that data-center buildout and server deployments, which for 2025 is likely to hit $93 billiion, will in 2026 almost certainly blow past $100 billion.
“We now expect CapEx to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion,” Ashkenazi said. “Looking out to 2026, we expect a significant increase in CapEx and will provide more detail on our fourth quarter earnings call.”
Final Thought
For the first three quarters of 2025, Google Cloud’s quarterly growth rate has gone from 28% to 32% to 34%, and the backlog numbers noted above offer significant reason to believe that impressive arc will continue. And Alphabet CEO Pichai says that ongoing investments have positioned Google Cloud very nicely for the AI Revolution, exemplified by the fact that Google Cloud offers 13 different products that have amassed revenue of $1 billion or more.
“As we scale, we are diversifying revenue,” Pichai said.
“Today, 13 product lines are each at an annual run rate over $1 billion, and we are improving operating margin with highly-differentiated products built with our own technology.
“This deep product differentiation starts with our AI infrastructure. We have a decade of experience building AI Accelerators and today offer the widest array of chips. This leadership is winning customers like HCA Healthcare, LG AI Research, and Macquarie Bank, and it’s why nine of the top ten AI labs choose Google Cloud.”
Pichai then mentioned the differentiator that I believe will give Google Cloud a distinct advantage with many customers eager to be full participants in the AI Revolution.
“We are also the only cloud provider offering our own leading generative AI models, including Gemini, Imagen, Veo, Chirp, and Lyria,” Pichai said.
“Adoption is rapidly accelerating: in Q3, revenue from products built on our generative AI models grew more than 200% year-over-year.”
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