Google Secures Cloud Deal with ServiceNow as Government Negotiations Heat Up

Alphabet (NASDAQ: GOOGL)’s Google Cloud has secured a major win, landing a $1.2 billion contract with enterprise software firm ServiceNow. The multi-year agreement comes as Google edges closer to a separate deal with the U.S. government that could reshape federal cloud pricing. Together, these developments strengthen Google Cloud’s enterprise momentum and validate Alphabet’s aggressive infrastructure investment strategy.

ServiceNow Agreement Signals Market Confidence

ServiceNow has committed to spending approximately $1.2 billion on Google Cloud services over the next five years. Announced on July 24, the deal encompasses network support, AI infrastructure, and scalable compute to power the company’s global platform. While financial terms remain undisclosed, the agreement marks a direct win over Amazon Web Services and Microsoft Azure—underscoring Google’s growing credibility in the enterprise segment.

Cloud Revenue Acceleration and Capex Surge

Alphabet’s Q2 2025 results confirmed Google Cloud’s growing weight. Revenue rose 32% year-on-year to $13.6 billion, while Alphabet’s overall sales reached $96.4 billion. Earnings per share stood at $2.31, aided by strong YouTube and search ad performance. CEO Sundar Pichai noted that Google Cloud is now on pace for over $50 billion in annualized revenue, with more than double the number of contracts over $250 million versus a year ago.

The company also raised its full-year capital expenditure guidance to $85 billion, from a prior estimate of $75 billion. Most of that will fund AI‑linked infrastructure—data centers, chips, and cloud capacity—underpinning continued growth in enterprise and AI‑as‑a‑service lines.

U.S. Government Contract Talks Advance

Google is in advanced talks to finalize a cloud deal with the U.S. government that includes significant price reductions, mirroring Oracle’s recent 75% federal discount. The move aligns with Trump-era federal procurement reforms aimed at cutting government IT costs. A finalized agreement would expand Google Cloud’s public sector presence and pressure rivals to follow suit on pricing.

While Google’s share in federal cloud services remains modest compared to AWS, the upcoming deal could act as a catalyst for larger contracts across agencies. Industry watchers view it as a pivotal step in breaking through institutional procurement inertia.

OpenAI and Shifting Strategic Alliances

In a notable development, Google Cloud signed a multi-year deal with OpenAI in May 2025, despite their direct rivalry in generative AI. The contract grants OpenAI access to Google’s compute infrastructure, signaling how demand for scalable AI infrastructure is blurring traditional competitive lines. The partnership adds a layer of credibility to Google Cloud’s service reliability and scaling capabilities.

Headwinds, Execution Risk, and Regulatory Pressure

Alphabet’s rapid infrastructure expansion brings execution risk. Constraints in chip availability, construction timelines, and energy supply could dampen delivery speed. Analysts have flagged concerns about near-term margin compression from capex intensity, especially as Alphabet finalizes its $32 billion acquisition of cybersecurity firm Wiz—its largest ever deal.

U.S. and EU regulators are also scrutinizing Google’s dominant position in AI and cloud services, including its bundling practices and market influence over startups that depend on its compute stack. While the ServiceNow and OpenAI deals are commercial wins, they could also amplify antitrust scrutiny heading into 2026.

Tips for Traders

• Watch Alphabet (NASDAQ: GOOGL) stock for upside momentum following news of large enterprise or government cloud contracts.

• Track Google Cloud’s revenue share versus AWS and Azure; continued acceleration may support re-rating within the broader tech sector.

• Monitor developments in Alphabet’s capex guidance, particularly around data center and AI infrastructure commitments.

• Consider options positioning or long exposure ahead of procurement news flow or Google Cloud Next announcements.

• Pay attention to regulatory headlines—especially around the Wiz acquisition—as sentiment risk may offset operational wins.