Second-quarter sales, excluding partner payouts, climbed to US$81.7bil, Google’s parent company. — Bloomberg
SAN FRANCISCO: Alphabet Inc has reported strong second-quarter revenue growth but says this year’s capital expenditures will be US$10bil greater than an earlier forecast, intensifying pressure on the company to justify investments it’s making to keep up in the artificial intelligence (AI) race.
Second-quarter sales, excluding partner payouts, climbed to US$81.7bil, Google’s parent company said in a statement.
Analysts had projected US$79.6bil on average, according to data compiled by Bloomberg.
The search giant boosted its target for capital expenditures this year to US$85bil, compared with the US$75bil plan previously disclosed.
Google’s core search advertising business and growing cloud computing services have become engines to support its heavy spending on AI.
The company is racing alongside Microsoft Corp, OpenAI, Meta Platforms Inc and others to bring AI products to market faster, from new modes of search to tools for cloud computing customers.
Chief executive officer Sundar Pichai said robust demand for cloud products and services justify the higher capital spending, and the company said it expects further increases in 2026, but didn’t give a specific forecast.
“We are seeing significant demand for our comprehensive AI product portfolio,” Pichai said on a conference call following the report. “Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers.”
Google’s cloud computing unit reported revenue of US$13.6bil and operating income of US$2.83bil, topping analysts’ projections.
Google remains in third place in this market, after Microsoft and Amazon.com Inc, but the company’s prowess in AI has helped it score client wins.
The unit is widely viewed as Alphabet’s strongest source of growth as the main search business matures.
“While the increased spending underscores Alphabet’s commitment to maintaining a competitive edge in emerging technologies, it also raises concerns about potential impacts on near-term profitability,” Jesse Cohen, senior analyst at Investing.com, wrote in an email. — Bloomberg
