Alphabet significantly increased investment in artificial intelligence (AI) infrastructure in the second quarter, as the Google parent reported stronger-than-expected revenue and earnings driven by robust demand for its cloud and AI services.
The technology giant nearly doubled capital expenditure during the quarter, spending US$44.9 billion on property and equipment, compared with US$22.4 billion in the same period last year. The spending reflects Alphabet’s continued expansion of AI infrastructure and global computing capacity to support growing demand for generative AI.
Alphabet also completed a US$49.6 billion equity offering, stating that the proceeds would be used to finance capital expenditure and other corporate purposes. The company raised its full-year capital expenditure guidance to between US$195 billion and US$205 billion, up from its previous forecast of US$180 billion to US$190 billion.
The increased investment came as Alphabet delivered a strong financial performance in the second quarter. Earnings per share reached US$9.11, comfortably exceeding analysts’ expectations of US$2.88, while revenue rose 24 per cent year-on-year to US$119.8 billion, surpassing the consensus estimate of US$116.52 billion.
Operating income increased 30 per cent, with the company’s operating margin expanding to 34 per cent. The quarter marked Alphabet’s 12th consecutive period of double-digit revenue growth.
Google Cloud was the standout performer, with revenue surging 82 per cent to US$24.8 billion as businesses accelerated spending on AI infrastructure, AI-powered solutions and core cloud services. Revenue from Google Services also increased 15 per cent, supported by continued growth in Google Search, YouTube advertising and subscription businesses.
Chief Executive Sundar Pichai said the company’s AI investments were generating broad-based growth across its businesses.
He noted that nearly 90 per cent of Fortune 100 companies now use Gemini Enterprise, while Gemini models process 22 billion API tokens every minute. The Gemini application has also grown to 950 million monthly active users.
During the company’s earnings call, Pichai said Google Cloud continued to attract new enterprise customers while expanding business with existing clients.
”We’re winning new customers, more than doubling our acquisition velocity year-over-year,” he said.
He added that existing customers were spending well beyond their original commitments, saying they were “exceeding their commitments by more than 50 per cent”.
Alphabet disclosed that Google Cloud’s backlog had reached US$514 billion, highlighting sustained demand for its AI and cloud offerings.
Google Search also remained a major contributor to growth. Revenue from Google Search and other services increased 17 per cent to US$63.3 billion during the quarter. Pichai attributed the performance to AI-powered search features, which continued to support growth in search activity, although the company did not provide specific query growth figures.
Despite the strong results, Alphabet’s shares fell 3.4 per cent in extended trading following the earnings announcement.
Gene Munster, Managing Partner at Deepwater Management, said the market reaction did not reflect the strength of the company’s cloud performance.
”Given what we now know, the stock should be up tomorrow. The Cloud number is the most important number and it was a massive beat,” he said.
The latest results reinforce Alphabet’s strategy of investing heavily in AI infrastructure to strengthen its cloud business while supporting growth across its core advertising operations, as competition in the AI market intensifies with rivals including Microsoft and Amazon.
