Google Cloud revenues topped $9 billion in Q4 2023, representing 26% year-over-year growth for the hyperscale cloud provider. Despite finally turning a profit in Q1 of 2023, Alphabet’s cloud business remained volatile with a material deceleration last quarter and a reacceleration this quarter.

Investors asked if it was the workload optimization cycle coming to its profitable end or the hyperscaler’s generative artificial intelligence (AI) (genAI) efforts finally paying off in Q4, and the answer turned out to be all of the above.

According to Alphabet CEO Sundar Pachai, Google Cloud’s AI services, built on a foundation of data, analytics, infrastructure and security, are helping drive interest and early adoption of cloud infrastructure services. More than 70% of the genAI unicorn companies are Google Cloud customers, Pachai touted.

“It's an area where our strengths will continue to play out as we go through ‘24, especially when I look at innovation ahead from us on the AI front,” he said.

“We're very pleased with the momentum of [Google Cloud Platform] with an increasing contribution from AI,” Alphabet CFO Ruth Porat added.

Google Cloud reported $11 billion data center capex for Q4 2023 and shared plans for a “notably larger” investment in the coming year, Porat said.

The hyperscaler’s Q4 capex was driven largely by investments in technical infrastructure. The largest portion of spending was on servers, followed by data centers.

Analyst research predicts that by 2028, cloud hyperscalers will spend nearly $100 billion in data center capex, and AI workloads will represent 25% of annual data center spending.

As it continues to rival Microsoft Azure and Amazon Web Services (AWS), Google Cloud plans to continue building data centers on a global scale.

Earlier this year Google Cloud shared plans to invest $1 billion to build a new data center in the U.K. “It’s vital that we invest in the technical infrastructure needed to support innovation and tech-led growth,” Google VP Debbie Weinstein wrote.

The new 33-acre data center campus in Waltham Cross, Hertfordshire will bring much-needed compute capacity to U.K. businesses, support AI innovation and ensure reliable delivery of Google Cloud services to customers in the U.K.

“The step up in capex in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally – and the long-term growth opportunities that offers,” Porat said.

Though timing of cash payments can impact quarterly capex numbers, “the main point is we are continuing to invest,” she said.