Google Cloud's Revenue Could Reach 50% in 2026

Morgan Stanley analysts forecast that the Google Cloud unit could have growth potential of over 50% by 2026. Analyst Brian Nowak stated that the bank's updated backlog model "has laid out a path for over 50% Google Cloud revenue growth in 2026."

Nowak noted that this growth presents "mid-single-digit increases" for investors and a potential of "over 15%" for the market. Additionally, Morgan Stanley emphasized that Google Cloud continues to be viewed as a driver for valuation increase and AI-enabled performance for Alphabet.

The company's new model divides Google Cloud's revenues into backlog and demand-based loads. Alphabet announced that approximately 55% of its $158 billion backlog is expected to be recognized as revenue over the next two years, as of the third quarter of 2025.

Historically, this backlog has accounted for about 45-50% of Google Cloud revenue; the remaining portion comes from demand-based loads. Morgan Stanley reported that the annual growth rate for demand-based services is expected to be 29% and 37% in 2023 and 2024, respectively, and approximately 25% growth is projected for 2025.

Based on these trends, Morgan Stanley's sensitivity analysis shows that if Google adds over $50 billion in net backlog in 2026 and the demand business grows by 15% or more, total cloud revenue could exceed 50%. Even under more cautious assumptions, with "annual growth of 25% on demand" and a "$20 billion increase in backlog," the model still supports over 50% growth, Nowak said.