How Alphabet Turned a Capacity Crunch Into a $462 Billion Cloud Advantage

Google parent rations Gemini AI as demand outstrips supply; cloud backlog surges to $462B. $180B capex planned for 2026, but stock dips 12% from high amid DeepMind talent exits.

Alphabet is telling some of the biggest names in technology that there simply isn't enough room for them. The Google parent has started rationing access to its Gemini AI models because demand for computing power has outstripped supply, according to a Financial Times report over the weekend. Meta Platforms is among the companies that have been turned away, causing several of its internal development projects to stall. For most businesses, turning away customers would be a crisis. For Alphabet, it is the clearest proof yet of pricing power that even the largest platforms cannot bypass.

That pricing power is backed by staggering numbers. The cloud unit's order backlog has nearly doubled in a single quarter to $462 billion — roughly six times the entire division's current annual revenue. Management expects more than half of that backlog to convert into recognised sales over the next 24 months. The division booked around $20 billion in revenue in the first quarter of 2026, up 63% year-on-year, making it the steady counterweight to the turbulence elsewhere in the business.

The company is betting aggressively that this momentum will continue. Capital expenditure for 2026 is planned between $180 billion and $190 billion, nearly double the 2025 level. A chunk of that spending will go toward expanding data centres and the company's own TPU chips for AI workloads. To help fund the buildout, Alphabet recently closed an $84.75 billion equity round, with Berkshire Hathaway contributing $10 billion through a private placement. It is a colossal promise to shareholders — one that now looks more credible given the backlog.

The cloud business is also pushing into new territory. Alphabet has struck a multi-year partnership with the Philippine government, and 56 public agencies are already using its AI tools for citizen services and security analytics. The company expects that number to reach 90 by the end of June. These government contracts are particularly valuable because they lock in long-term, stable revenue and demonstrate that Alphabet's platform can meet strict regulatory standards.

Yet the picture is not entirely without clouds. The stock closed Monday at €308.90, up 4.11% on the day, but still roughly 12% below the 52-week high of €350.75 reached in May. The relative strength index sits at 46.4, technically neutral, while the share price remains comfortably above the 200-day moving average of €271.22 — a signal many institutional investors read as a trend confirmation.

What is weighing on the share price? Two high-profile departures from Google DeepMind have rattled investor confidence. Nobel laureate John Jumper defected to Anthropic, and Noam Shazeer, co-lead of the Gemini models, left for OpenAI. The exits have raised questions about whether Alphabet can retain the talent needed to stay ahead in the AI race, even as it pours unprecedented sums into infrastructure.

The Dow Jones Industrial Average now includes Alphabet after the Google parent replaced Verizon on Monday, a symbolic nod to the technology and AI sector's dominance over the 30-stock index. The move was made possible by the 20-for-1 stock split in July 2022, which brought the share price into a range compatible with the Dow's price-weighted methodology. Index-tracking funds managing roughly $115 billion in assets were forced to buy Alphabet shares to reflect the change, providing a tailwind.

For now, the market's attention is fixed on the capacity crunch and the giant backlog. The next concrete catalyst will be second-quarter earnings, expected in late July. Those numbers will show whether Alphabet can translate its rationing power into margin expansion — or whether the twin pressures of spending and talent flight begin to bite.