Google Cloud surges 32% as Alphabet raises AI spending to $85B

Google’s parent company Alphabet exceeded Wall Street expectations in its second quarter earnings, reporting $96.43 billion in total revenue against an expected $94 billion. The tech giant also raised its 2025 capital spending target to approximately $85 billion from $75 billion, driven by massive demand for cloud computing services and the ongoing AI arms race among Big Tech companies.

What you should know: Alphabet’s strong performance was powered by robust growth in Google Cloud and steady digital advertising revenue.

• Google Cloud revenue surged nearly 32%, well above the estimated 26.5% increase that analysts had projected.
• Google’s advertising revenue, which represents about three-quarters of the company’s overall sales, rose 10.4% to $71.34 billion, beating expectations of $69.47 billion.
• Despite the strong earnings beat, Alphabet shares fell 1% in extended trading, even after rising more than 18% since the previous earnings report in April.

The big picture: Alphabet’s increased capital spending reflects the broader Big Tech commitment to AI infrastructure development amid intensifying competition from Chinese rivals.

• The company’s revised $85 billion spending target contributes to the more than $320 billion that Big Tech companies are expected to invest in building AI capabilities this year.
• Companies have defended their aggressive AI spending despite investor frustration with slower-than-expected payoffs, arguing these investments are necessary to fuel growth and improve products.

What they’re saying: CEO Sundar Pichai emphasized the connection between cloud demand and increased investment.

• “With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures,” Pichai said in an earnings release.

Why this matters: The earnings results demonstrate how AI-driven cloud services are becoming a major revenue driver for tech giants, justifying massive infrastructure investments even as companies face pressure to show immediate returns on their AI spending.