Google Cloud has emerged as the leading artificial intelligence (AI) cloud platform following a strong first quarter, according to a new report by Bernstein, which said accelerating cloud growth and improving profitability have helped the company outpace rivals in incremental cloud revenue despite continued heavy investment in AI infrastructure.
The report highlighted Google Cloud’s exceptional performance, with revenue growing 63% year on year, surpassing the growth rates recorded by Amazon Web Services (AWS), Microsoft Azure and Oracle Cloud.
Bernstein attributed the strong performance to robust demand for Google’s Gemini AI models, AI-powered services and enterprise cloud workloads.
Google Cloud also recorded operating margins of around 33%, reflecting improved profitability as businesses increased spending on AI infrastructure and cloud-based services.
The combination of rapid revenue growth and expanding margins has strengthened Google’s competitive position in the increasingly crowded AI cloud market.
Microsoft remained one of the sector’s strongest long-term beneficiaries of the AI boom, with Azure delivering approximately 40% revenue growth.
The company said its annualised AI revenue has exceeded $37 billion, driven by continued adoption of Copilot, GitHub and Azure AI services. However, Bernstein noted that Microsoft continues to face capacity constraints as customer demand outpaces available infrastructure.
Amazon Web Services also maintained solid momentum during the quarter, with cloud revenue increasing 28% while its backlog expanded to $364 billion. Bernstein said triple-digit growth in AI demand, wider adoption of Trainium AI chips and sustained enterprise cloud workloads continued to underpin AWS’s performance despite ongoing supply limitations.
Oracle remained the fastest-growing major cloud provider, with Oracle Cloud Infrastructure revenue surging 93% compared with the same period last year.
The company also reported remaining performance obligations of $638 billion, highlighting growing customer commitments as demand for AI infrastructure accelerates.
Bernstein said the race to build AI infrastructure is intensifying across the technology sector. Combined capital expenditure by the world’s largest hyperscale cloud providers is projected to exceed $620 billion this year as companies rapidly expand data centre capacity to meet surging demand for AI computing.
The report added that the industry’s biggest bottleneck has shifted from shortages of graphics processing units (GPUs) to the availability of powered data centre capacity.
As a result, the speed at which companies can deploy new infrastructure and bring additional computing capacity online is becoming an increasingly important competitive advantage in the global AI race.
