Google-owner Alphabet has said it will spend an extra $10 billion on capital expenditure (CapEx) this year, taking its tab to $85bn amid demand for infrastructure to power the AI boom.
The $10bn bump to its previously announced $75 billion spending plan came alongside alongside Alphabet's quarterly results announcement, which saw company-wide revenue up by 14% to 96.4bn. Big winners for Alphabet included Google Services, Search and Cloud, all of which posted double digit growth.
Google Cloud saw 32% year-on-year growth for $13.6bn in revenue for the quarter, with income climbing from $1.2bn to $2.8bn, which the company said was led by Google Cloud Platform, AI infrastructure and Generative AI solutions.
"Search delivered double-digit revenue growth, and our new features, like AI Overviews and AI Mode, are performing well. We continue to see strong performance in YouTube as well as subscriptions offerings," Sundar Pichai, CEO at Alphabet, said in a statement.
He added: "And Cloud had strong growth in revenues, backlog and profitability. Its annual revenue run-rate is now more than $50 billion. With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures in 2025 to approximately $85 billion and are excited by the opportunity ahead."
Alphabet is expected to spend even more money on infrastructure next year – and other hyperscalers are doing the same. Meta is said to be investing as much as $72bn in CapEx for the year, while Amazon is tipped to invest $100bn; Microsoft is planning to spend $80bn. This has sparked criticism that AI is costing too much for how much it's being actually used.
Big capital expenditure boost
Anat Ashkenazi, senior VP & CFO at Alphabet, said the company spent $22.4bn on CapEx projects over the second quarter. "With respect to CapEx in the second quarter, our CapEx was $22.4 billion," Ashkenazi said in an earnings call. "The vast majority of our CapEx was invested in technical infrastructure with approximately 2/3 of investments in servers and 1/3 in data centers and networking equipment."
She added that Google has had to work hard to increase capacity and has improved the pace of server deployment, but said the tight supply amid high demand for services would continue into 2026.
Ashkenazi said the extra investment of $10bn to a total of $85bn for the year was down to "strong demand for cloud products and services."
"Looking out to 2026, we expect a further increase in CapEx due to the demand we're seeing from customers as well as growth opportunities across the company."
Pichai admitted there would be a time delay between any investment and the results, but said it was worth spending the money now to solidify Google's success with cloud.
"We are definitely investing because we are delivering a lot of value through our cloud offerings," he said on the conference call in response to an analyst question. "And I think it's important to understand as we build more and more of an installed base with Google Cloud. We have very high customer satisfaction. Our churn rates are very low, and we are much more efficient in the investments needed to grow those lines of businesses."
Pichai added: "And so all that gives us confidence as we are investing in this, we'll be able to have a healthy ROI on our investments. And particularly in this AI moment, there's definitely – the value we are delivering to the customers is also growing pretty significantly on a forward-looking basis. And so I think all that will help us do well here."
Search success
Google also reported success in Search, an area under scrutiny given the potential impact from OpenAI's ChatGPT.
Pichai said Search saw double-digit revenue growth: this quarter, the division posted revenue of $54.1bn versus the same quarter last year's $48.5bn.
He pointed to AI Overviews, the AI-powered summary tool that sits atop some results, saying it has more than two billion monthly users. "We know how popular AI Overviews are because they are now driving over 10% more queries globally for the types of queries that show them, and this growth continues to increase over time," Pichai said on the conference call.
Philipp Schindler, senior vice president and chief business officer at Google, added that the company sees monetization for new search techniques at "approximately the same rate" as previous formats, suggesting Google sees little change to its revenues in this area.
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