Morgan Stanley says Google Cloud could grow 50%+ in 2026

Investing.com -- Google Cloud could see a surge in growth next year, with Morgan Stanley analysts projecting that the units revenue could expand more than 50 percent in 2026.

In a new note, Morgan Stanley analyst Brian Nowak told investors that the banks updated backlog model outlines [a] path to 50%+ Google Cloud revenue growth in 26, representing mid single digit+ % upside to us and 15%+ upside to Street.

Nowak notes that the brokerage continues to see Google Cloud as a driver of GOOGL multiple expansion and AI-driven outperformance.

The firms new model breaks down Google Clouds revenue between backlog and on-demand workloads.

Alphabet recently disclosed that ~55% of its $158bn backlog in 3Q25 is expected to be recognized as revenue in the next 2 years.

Historically, that backlog has driven around 45-50% of Google Cloud revenue, with the rest coming from on-demand workloads, which Morgan Stanley said have grown 29%/37% y/y in 23/24 and roughly 25% YTD in 25.

Based on those trends, Morgan Stanleys sensitivity analysis shows that if Google adds about $50bn+ in net backlog in 26 and the on-demand business grows 15% or more, total cloud revenue growth could exceed 50 percent.

Even under more conservative assumptions, 25% Y/Y growth in on demand and a $20bn step-up in backlog, the model still supports 50 percent-plus growth, Nowak stated.