---
title: "Pichai says Google Cloud forgoes revenue so DeepMind gets compute first; a $514 billion backlog waits"
description: "Sundar Pichai says Google Cloud is forgoing revenue so DeepMind gets scarce compute first. A London power failure that downed three banks the same week shows who pays, and the October 28 report has to price it."
publisher: "The Inference"
section: "Data Center"
published: 2026-10-22T13:06:47.684Z
modified: 2026-10-22T13:06:47.684Z
canonical: https://theinference.org/article/pichai-says-google-cloud-forgoes-revenue-so-deepmind-gets-compute-first-a-514-billion-backlog-waits
language: en
keywords: "Alphabet, Google Cloud, Google DeepMind, Data Centers, AI Compute, Earnings"
---

# Pichai says Google Cloud forgoes revenue so DeepMind gets compute first; a $514 billion backlog waits

> Sundar Pichai says Google Cloud is forgoing revenue so DeepMind gets scarce compute first. A London power failure that downed three banks the same week shows who pays, and the October 28 report has to price it.

[Sundar Pichai](https://theinference.org/markets/people/sundar-pichai) said the quiet part out loud this week: Google Cloud is deliberately forgoing revenue so [Google DeepMind](https://theinference.org/markets/companies/google-deepmind) keeps first claim on scarce compute, and the shortage runs into 2027 [1][2]. The trade is the right one for the long game. What it costs is unknown outside Google, and that is what [Alphabet](https://theinference.org/markets/companies/alphabet)'s October 28 report now has to price [1].

## The lab eats first, by the CEO's own account

"Our cloud business is at any given moment in time forgoing short-term revenues because we are making compute trade-offs to support frontier AI development," Alphabet's chief executive told the Big Technology Podcast released on October 20 [1]. Compute for Google DeepMind, the company's frontier AI lab, is "non-negotiable" [1]. Serving new customers who want capacity for 2027 would be "incredibly difficult," because the capacity on sale today was fixed by decisions made in 2024, before agentic AI, systems that carry out multi-step tasks on their own, sent demand vertical [2].

The chain runs from chips to frontier models to everything built on top of them, and money cannot compress the middle link. Alphabet already guides to $195 to $205 billion of capital spending this year [3], and its quarterly outlay has risen every quarter for two years [4]. Capital is no longer the constraint; construction time is. [Microsoft](https://theinference.org/markets/companies/microsoft), [Meta](https://theinference.org/markets/companies/meta), [Oracle](https://theinference.org/markets/companies/oracle), [Amazon](https://theinference.org/markets/companies/amazon) and Alphabet have committed [about $1.09 trillion in lease payments](https://www.reuters.com/business/retail-consumer/ai-data-centre-race-builds-1-trillion-lease-burden-big-tech-2026-08-04/), mostly for data centers, under leases that have not yet begun [5].

*Chart: **Capex set another record in Q2, and 2027 capacity is still short** Alphabet quarterly capital expenditure rising every quarter from about $13 billion in Q3 2024 to about $45 billion in Q2 2026*

*Quarterly capital expenditure from Alphabet's SEC filings, in billions of dollars [4][2]*

## The backlog turns into revenue only as data centers switch on

Cloud revenue grew 82% in the quarter through June at a 35.6% operating margin [3][6]. The backlog [disclosed with July's results](https://www.fool.com/investing/2026/09/13/sundar-pichai-alphabets-backlog-514-billion/) stands at $514 billion, more than Alphabet collected across the entire company over the past year [6]. That strength is what lets Google ration without the division looking weak.

But the backlog converts only as capacity arrives, and the chief executive has now said his research queue comes ahead of the paying line, without a figure for what is being forgone [1][6]. [The Inference priced that backlog in September](https://theinference.org/article/goldman-turns-alphabet-s-514-billion-backlog-into-a-300-billion-a-year-bill); what changed this week is who stands at the front of the line.

## One power event, three banks, and Europe's new rules

Rationing has a reliability twin. On October 20, [a power event at a third-party facility](https://www.theregister.com/paas-and-iaas/2026/10/20/google-cloud-says-a-power-event-caused-todays-outage/5304160) took out europe-west2-b, a single London availability zone; downtime began at 06:08 UTC and most customers were restored by 14:03 UTC [7]. At Revolut, which has around 13 million UK customers, logins, card payments and cash withdrawals were hit; Lloyds and HSBC were among the banks affected and declined to comment [8].

The European Banking Authority has contacted Google, and Britain's Treasury Committee [has written to the Bank of England and the Financial Conduct Authority](https://kelo.com/2026/10/21/europes-financial-regulators-query-google-over-cloud-outage-that-hit-banks/): the first real test of regimes that treat cloud providers as critical third parties while leaving banks responsible for services built on rented infrastructure [8]. Europe's banks run on the same scarce capacity Google is rationing, and one zone's failure left millions of customers without payment services for hours [8].

## October 28 is where the rationing gets priced

Feeding the lab first is the right call: frontier capability compounds, and a chip rented out this morning never does. But a trade this large needs a boundary, and the October 28 report after the close is where it shows [6]. Watch for a timeline on converting the $514 billion backlog, and for cloud growth against the 82% print [6].

[Options imply a 5% move](https://coincentral.com/alphabet-googl-stock-what-wall-street-expects-from-earnings-wednesday-2/), a bar Alphabet has beaten in five of its past eight reports [9]. The stock closed at $334.76 on October 21 [9], well below its high of $408.61 [9]. And if conversion slips while DeepMind eats first, customers have nowhere obvious to go: AWS is reportedly sold out through 2028 [2].

## Takeaway

Alphabet is rationing scarce compute in DeepMind's favor, and the October 28 report must put a price on what Google Cloud gives up; a London outage that downed three banks the same week shows what customers bear while they wait.

## Sources

1. [24/7 Wall St, "Alphabet Slips 2% Despite NASDAQ Rally as Pichai Says Google Cloud Is Giving Up Revenue for AI Capacity", 21 October 2026](https://247wallst.com/investing/2026/10/21/alphabet-slips-2-despite-nasdaq-rally-as-pichai-says-google-cloud-is-giving-up-revenue-for-ai-capacity-amazon-dips-microsoft-holds-steady/)
2. [Crypto Briefing, "Google CEO Sundar Pichai says securing compute for 2027 is incredibly difficult", 21 October 2026](https://cryptobriefing.com/sundar-pichai-google-compute-2027-challenge/)
3. [Crypto Briefing, "Google Cloud prioritizes frontier AI over short-term revenue", 21 October 2026](https://cryptobriefing.com/google-cloud-prioritizes-frontier-ai-revenue/)
4. [Alphabet, quarterly figures from its SEC filings, retrieved 22 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001652044)
5. [Reuters, "AI data-centre race builds $1 trillion lease burden for Big Tech", 4 August 2026](https://www.reuters.com/business/retail-consumer/ai-data-centre-race-builds-1-trillion-lease-burden-big-tech-2026-08-04/)
6. [The Motley Fool, "Sundar Pichai Says Alphabet's Cloud Backlog Hit $514 Billion After 82% Revenue Growth Last Quarter", 13 September 2026](https://www.fool.com/investing/2026/09/13/sundar-pichai-alphabets-backlog-514-billion/)
7. [The Register, "Google Cloud says a 'power event' caused today's outage", 20 October 2026](https://www.theregister.com/paas-and-iaas/2026/10/20/google-cloud-says-a-power-event-caused-todays-outage/5304160)
8. [Kelo (Reuters), "Europe's financial regulators query Google over cloud outage that hit banks", 21 October 2026](https://kelo.com/2026/10/21/europes-financial-regulators-query-google-over-cloud-outage-that-hit-banks/)
9. [CoinCentral, "Alphabet (GOOGL) Stock: What Wall Street Expects from Earnings Wednesday", 21 October 2026](https://coincentral.com/alphabet-googl-stock-what-wall-street-expects-from-earnings-wednesday-2/)


---

Pichai says Google Cloud forgoes revenue so DeepMind gets compute first; a $514 billion backlog waits — The Inference. Canonical: https://theinference.org/article/pichai-says-google-cloud-forgoes-revenue-so-deepmind-gets-compute-first-a-514-billion-backlog-waits