AI drives billions in Google Cloud's new revenue, CEO says

Google Cloud CEO Thomas Kurian said the company is making billions of dollars by monetizing its AI services.

He outlined revenue streams from AI, including usage-based billing, subscriptions, and upselling to higher product tiers.

Google Cloud’s customer backlog has hit US$106 billion, with more than half expected to convert to revenue in the next two years.

Alphabet reported US$13.6 billion in cloud revenue for Q2 2025, up 32% year-on-year, and a net income of US$28.2 billion.

Kurian described models where enterprise customers pay by AI infrastructure usage or subscription.

He highlighted recent wins such as a six-year, US$10 billion cloud contract with Meta. He also noted growth in cybersecurity subscriptions and increased spending by existing customers on AI products.

🔗 Source: CNBC

🧠 Food for thought

Implications, context, and why it matters.

AI services are transforming Google Cloud’s revenue trajectory at unprecedented scale

Google Cloud’s AI-focused strategy is generating substantial returns, with AI-specific services now producing $600 million monthly in revenue1.
This AI momentum has accelerated overall cloud growth to 35% in Q3 2024—the fastest growth rate in eight quarters—compared to traditional cloud services that typically see single-digit growth rates2.
The company’s $106 billion customer backlog, with over 50% expected to convert to revenue within two years, demonstrates how AI demand is creating long-term revenue visibility that wasn’t present in earlier cloud computing cycles.
Google’s heavy infrastructure investment of $85 billion in capital expenditures for 2025 specifically targets AI servers and data centers, showing how AI workloads require fundamentally different infrastructure than traditional cloud services1.

Google’s three-tier monetization approach captures different customer segments and usage patterns

The consumption model allows customers to pay per token for AI processing or by “deflection rates” for customer service systems, creating a direct connection between business value and costs.
Subscription tiers range from Google One’s $1.99 monthly personal storage to the premium “Google AI Ultra” at $249.99 monthly for cutting-edge AI access, demonstrating how Google segments customers by sophistication and willingness to pay.
The upselling strategy leverages customer stickiness—once businesses adopt Google’s AI services, they typically expand usage across multiple products, with nearly two-thirds of customers now meaningfully using Google Cloud’s AI tools.
This diversified approach helps explain Google Cloud’s 28% sequential quarter-over-quarter growth in new customer wins, as different pricing models can attract various business types and sizes simultaneously.