Google Cloud's record results can't quiet concerns on AI spending and model release timelines
Sundar Pichai defended the cost of AI rollouts and delays to frontier models following quarterly results
Google Cloud has recorded its best quarterly growth to date, with earnings reports showing revenue surging 82% to $24.8bn.
Across the wider company, Google-owner Alphabet saw revenue climb 24% to $119.8bn, with income up 30%.
Despite such gains, Google was still on the back foot, with share prices falling 3% after revealing a big boost in capital expenditure and being forced to defend delays to its top-end AI model.
"Q2 was an amazing quarter, with Alphabet revenues growing 24% year-over-year and Google Cloud revenues accelerating to 82% growth, driven by demand for AI infrastructure and AI solutions," said CEO Sundar Pichai in a statement. "It’s great to see wide adoption of Gemini Enterprise, with nearly 90% of the Fortune 100 using it."
"Our AI investments are redefining what’s possible across every part of our business."
Continued capex concerns
After the results were announced, Google admitted in a conference call it will increase its capital expenditure this year, which is largely focused on AI infrastructure spending such as data centers.
Last quarter, that was bumped up by $5bn to an already massive $180bn to $190bn, and it has now been increased to $195bn to $205bn.
Over the second quarter alone, Google recorded capex of $45bn, with most used to boost "technical infrastructure to support our investments in AI," said Anat Ashkenazi, senior VP and CFO, according to a transcript of the conference call.
"The increase in the range is primarily due to an acceleration in the delivery of capacity to meet growing demand," said Ashkenazi, adding that spending would "increase significantly" in 2027.
Google isn’t alone in dealing with surging capex rates. Amazon Web Services (AWS) is projected to spend $200bn and Meta plans as much as $145bn.
These huge outlays have sparked concerns about the cost of AI over the last 18 months, but industry leaders insist it's all part of the process. Pichai compared this stage of AI to the early days of the shift to the cloud.
"I do think it feels like we are in very early innings of what feels like a secular shift across multiple areas in our core information businesses just the possibilities when I see what all you can do with the absolute frontier capabilities, there's still a lot of work ahead to translate all that into experiences for our consumer users," he said, in response to an analyst question.
Ashkenazi added that "while we have increased our capacity quite significantly over the past 3 years, the demand still outpaces that investment."
AI delays
Google Cloud might be flying high, but concerns over AI model-related delays are rising among investors. The firm’s flagship model was once again delayed this week.
The company unveiled Gemini 3.6 Flash and a cyber-focused model, Gemini 3.5 Flash Cyber this week, following the lead of competitors such as Anthropic in the space.
However, Gemini 3.5 Pro wasn’t included in the launch after initially being set for release in June. Google said it would be made available "as soon as it's ready".
"Gemini 3.5 Pro is currently in testing and our team is already building the next generation of models," Pichai said on the conference call. "We have started our most ambitious pretraining run yet for Gemini 4 and are excited by the progress we are seeing at the frontier."
That didn't convince one analyst, Douglas Anmuth from JPMorgan Chase & Company, who asked about Pichai's confidence in keeping Gemini models at the frontier — the front of the pack, the leading edge of AI development.
Pichai defended Google's AI efforts, saying the company was "very committed and very confident of being at the frontier, and, model releases aside, remains a leader on "many attributes" — though he admitted work was needed on coding and agentic coding.
"I am very excited by the progress I'm seeing internally on Gemini 4, and I'm confident that people will be pleased when we are putting it outside," he added.
FOLLOW US ON SOCIAL MEDIA
Follow ITPro on Google News and add us as a preferred source to keep tabs on all our latest news, analysis, views, and reviews.
You can also follow ITPro on LinkedIn, X, Facebook, and BlueSky.
-
Palo Alto Networks targets application observability gains with latest acquisitionNews The company will integrate Embrace features with its Cortex AgentiX service
-
Five tech companies that have undergone a radical reinventionIn depth History is littered with examples of businesses that have reinvented themselves for the better, and worse – and these are our top picks
-
AI projects are stalling at mid-market firms – Google Cloud and Accenture want to solve thatNews The new scheme aims to help mid-market companies move from pilot to production faster than ever before
-
Google facing massive EU fine as it appeals search suit in USNews The European Union is said to be looking to avoid a big fine, but that may require Google to agree to changes
-
Big tech earnings: Hyperscaler growth rates impress, but concerns remain over surging infrastructure capexNews Concerns remain over big tech infrastructure spending despite positive earnings reports
-
Openreach targets emissions reductions, faster broadband roll-out with Google Cloud dealNews The telecoms giant has built digital twins of the UK’s “key transportation corridors” to identify regions for infrastructure upgrades
-
‘We must lead this shift’ Unilever taps Google Cloud to supercharge business transformation and pioneer 'agentic commerce'News The deal will create a new model for how consumer packaged goods brands are discovered and bought, according to Unilever
-
European Commission clears Google’s Wiz acquisition, citing 'credible competition' from Amazon and MicrosoftNews Regulators said there are “several credible competitors” to Google regardless of the acquisition
-
Are hyperscalers backing out of Net Zero?ITPro Podcast Expanding data center construction and demand for high-energy workloads are pushing hyperscalers off course on carbon
-
Microsoft CEO Satya Nadella says UK ties are 'stronger than ever' as tech giant pledges $30bn investmentNews Microsoft CEO Satya Nadella says it's commitment to the UK is "stronger than ever" after the tech giant pledged $30bn to expand AI infrastructure and build a new supercomputer.
