Morgan Stanley's big prediction: Alphabet Inc. Class C's cloud revenue (GOOGL.US) in 2026 may surge by over 50%

Alphabet Inc. Class C cloud (GOOGL.US) is expected to experience a growth explosion next year, with Morgan Stanley analysts predicting that the department's revenue growth in 2026 may exceed 50%. In a recent report, Morgan Stanley analyst Brian Nowak told investors that the bank's updated backlog model "outlines a path for Alphabet Inc. Class C cloud revenue to grow over 50% in 2026," which means "there is a mid-teens upward adjustment compared to our previous expectations and over 15% upward adjustment compared to market consensus." Nowak pointed out that the bank still sees Alphabet Inc. Class C cloud as "a core driver of Alphabet's valuation multiple expansion and AI-driven outperformance." The new model of the bank breaks down Alphabet Inc. Class C cloud revenue into backlog contribution and on-demand workloads contribution. The company recently disclosed that "approximately 55% of the $158 billion backlog in the third quarter of 2025 is expected to be recognized as revenue in the next two years." Historically, these backlog orders typically contribute "45%-50% of Alphabet Inc. Class C cloud revenue," with the remaining coming from on-demand workloads. Morgan Stanley stated that on-demand business "grew by 29%/37% year-over-year in 2023/2024" and "increased by approximately 25% since the beginning of 2025." Based on these trends, Morgan Stanley's sensitivity analysis shows that if Alphabet Inc. Class C cloud saw a "net addition of backlog orders exceeding $50 billion in 2026," and on-demand business grows by 15% or more, the total revenue growth of the cloud business could exceed by 50%. Nowak mentioned that even under more conservative assumptions "on-demand business grows by 25% year-over-year" and "backlog orders increase by $20 billion," the model still supports expectations of over 50% growth.