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 unit’s revenue could expand more than 50 percent in 2026.

In a new note, Morgan Stanley analyst Brian Nowak told investors that the bank’s 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 firm’s new model breaks down Google Cloud’s 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 Stanley’s 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.

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