Google parent Alphabet surprises with capital spending boost after earnings beat
Alphabet on Wednesday cited massive demand for its cloud computing services as it hiked its capital spending plans for the year to about $85 billion and predicted a further increase next year.
The search giant strongly beat Wall Street estimates for quarterly revenue and profit on the back of new AI features and a steady digital advertising market.
Revenue growth was driven by
Cloud's sales, which surged nearly 32%, well above estimates for a 26.5% increase.
"With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures." CEO
Sundar Pichai
said in an earnings release.
Shares of the company, which have risen more than 18% since its previous earnings report in April, dipped initially in extended trading after the report before rallying as executives shared details about strong cloud demand on a call with analysts.
But investors were surprised by the planned capital spending increase.
"I don't think anyone was expecting a change to that 2025 capex guide," said Dave Wagner, portfolio manager at Aptus Capital Advisors. "Google had an amazing quarter. It was an easy beat, and it was just offset by this $10-billion increase in capex."
Capital spending is expected to increase further in 2026 due to demand and growth opportunities, Chief Financial Officer Anat Ashkenazi said on the call.
Ashkenazi added that while the pace of server deployment has improved, Alphabet continues to face more customer demand for its cloud services than it can supply.
Google had earlier pledged about $75 billion in capital spending this year, part of the more than $320 billion that Big Tech is expected to pour into building AI capabilities.
CLOUD GAINS
The rise of artificial intelligence technologies has propelled demand for cloud computing services. Google Cloud still trails Amazon's AWS and Microsoft's Azure in total sales, but has tried to gain ground by touting AI offerings, including its in-house TPU chips that rival Nvidia's GPUs.
The business segment grew its quarter-over-quarter customer count by 28%, Pichai said on the call.
"The comprehensiveness of our AI portfolio, the breadth of our offerings, both providing our models on GPUs and TPUs for our customers, all of that has been really driving demand," he said. In a huge win for Alphabet, ChatGPT maker OpenAI recently added Google Cloud to its list of cloud capacity suppliers, as Reuters exclusively reported in June, in a surprising collaboration between two companies that are competing head-to-head in AI. It also marked OpenAI's latest move to diversify beyond its major backer Microsoft.
The capex increase nevertheless raises concerns about Alphabet's pace of monetization and its impact on near-term profitability, Investing.com senior analyst Jesse Cohen said.
Alphabet and its peers have defended their aggressive AI spending amid rising competition from Chinese rivals and investor frustration with slower-than-expected payoffs, saying those massive investments are necessary to fuel growth and improve their products.
AI RACE
Google Search's artificial intelligence features such as AI Overviews and AI Mode are also helping the company boost engagement and tackle rising competition from chatbots such as ChatGPT that have surged in popularity. AI Mode has grown to 100 million monthly active users just two months after Google announced the start of its large-scale rollout during its annual developer conference. Google's own ChatGPT competitor, called Gemini, has more than 450 million monthly users, Pichai said.
Google's advertising revenue, which represents about three-quarters of the tech major's overall sales, rose 10.4% to $71.34 billion in the second quarter, beating expectations for $69.47 billion, according to data from LSEG.
"Hopefully, this will damper concerns by the investment community that has been worried that products like OpenAI/ChatGPT could be having an impact on Google's Search query growth," said Dan Morgan, senior portfolio manager at Synovus Trust.
Alphabet reported total revenue of $96.43 billion for the second quarter ended June 30, compared with analysts' average estimate of about $94 billion, according to data compiled by LSEG.
The company reported profit of $2.31 per share for the period, beating estimates of $2.18 per share, according to LSEG data.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
24 minutes ago
- Economic Times
Will AI take away our sense of purpose? Sam Altman says, ‘People Will have to redefine what it means to contribute'
Synopsis OpenAI CEO Sam Altman, in a conversation with Theo Von, addressed concerns about AI's impact on humanity. Altman acknowledged anxieties surrounding job displacement and data privacy, particularly regarding users sharing personal information with AI. He highlighted the lack of legal protections for AI conversations, creating a privacy risk. AP OpenAI CEO Sam Altman talked about AI's impact on jobs and human purpose. Altman acknowledged concerns about data privacy and the rapid pace of AI development. He also addressed the lack of clear legal regulations. Altman highlighted the risks of users sharing personal information with AI. In a rare, thought-provoking conversation that danced between comedy and existential crisis, OpenAI CEO Sam Altman sat down with podcaster Theo Von on This Past Weekend. What unfolded was less a traditional interview and more a deeply human dialogue about the hopes, fears, and massive unknowns surrounding artificial intelligence. As AI continues its unstoppable advance, Von posed a question many of us have been quietly asking: 'Are we racing toward a future where humans no longer matter?' Altman didn't sugarcoat the situation. He agreed with many of Von's concerns, from data privacy to AI replacing jobs, and even the unnerving pace at which the technology is evolving. 'There's this race happening,' Altman said, referring to the breakneck competition among tech companies. 'If we don't move fast, someone else will — and they might not care as much about the consequences.' But amid all the alarms, Altman offered a cautious dose of optimism. 'Even in a world where AI is doing all of this stuff humans used to do,' he said, 'we are going to find a way to feel like the main characters.' His tone, however, betrayed a sense of uncertainty: the script isn't written yet. Perhaps the most powerful moment came when Von bluntly asked: 'What happens to our sense of purpose when AI does everything for us?' Altman acknowledged that work has always been a major source of meaning for people. While he's hopeful that AI will free humans to pursue more creative or emotional pursuits, he conceded that the transition could be deeply painful. 'One of the big fears is like purpose, right?' Von said. 'Like, work gives us purpose. If AI really continues to advance, it feels like our sense of purpose would start to really disappear.' Altman responded with guarded hope: 'People will have to redefine what contribution looks like… but yeah, it's going to be unsettling.' In what may be one of the most revealing admissions from a tech CEO, Altman addressed the disturbing trend of people — especially young users — turning to AI as a confidant or therapist. 'People talk about the most personal sh*t in their lives to ChatGPT,' he told Von. 'But right now, if you talk to a therapist or a lawyer or a doctor about those problems, there's legal privilege… We haven't figured that out yet for when you talk to ChatGPT.' With AI tools lacking legal confidentiality protections, users risk having their most intimate thoughts stored, accessed, or even subpoenaed in court. The privacy gap is real, and Altman admitted the industry is still trying to figure it out. Adding to the complexity, Altman highlighted how the lack of federal AI regulations has created a patchwork of rules that vary wildly across states. This legal uncertainty is already playing out in real-time — OpenAI, for example, is currently required to retain user conversations, even deleted ones, as part of its legal dispute with The New York Times. 'No one had to think about that even a year ago,' Altman said, calling the situation 'very screwed up.'
India.com
24 minutes ago
- India.com
Open AI's ChatGPT, Google's Gemini and Microsoft's Copilot: How is AI taking away our Drinking water? Read full story here
AI drinking water- Representational AI image We all know and accept the fact that artificial intelligence (AI) has become a very important part of our lives. With being increasingly integrated into daily life, concerns are mounting over the environmental footprint of AI, which is particularly related to its growing consumption of water and electricity required to operate the massive data centers needed to run AI queries by apps like Open AI's ChatGPT, Google's Gemini and Microsoft's Copilot. As per a report by BBC Hindi, the expansion of AI technologies could intensify global water stress, especially in the face of climate change and its rising demand. It has been revealed by media reports that AI systems like ChatGPT rely on vast data centers that consume enormous energy and water for cooling. How AI is taking away your drinking water? The reports have also revealed that a single AI query may use significantly more electricity, which will need more water for cooling, than a typical internet search. Proving the claim, International Energy Agency (IEA) has estimated that a query made on ChatGPT consumes about 10 times more electricity than a search made on Google search engine. Studies also indicate that the AI industry could use 4–6 times more water annually than a country like Denmark by 2027. Also, companies such as Google, Microsoft, and Meta have reported major increases in water use with the increased use of AI. With many data centers being set up in drought-prone areas, the companies have also dealt with sparking protests and environmental backlash. What Sam Altman said on future of AI? As AI begins to transform industries globally, ensuring that the benefits of AGI (Artificial General Intelligence) are broadly distributed is critical, according to OpenAI Co-founder and CEO Sam Altman. The historical impact of technological progress suggests that most of the metrics we care about (health outcomes and economic prosperity, etc.) get better on average and over the long-term, but increasing equality does not seem technologically determined and getting this right may require new ideas, he emphasised in a new blog post. (With inputs from agencies)
Time of India
28 minutes ago
- Time of India
Will AI take away our sense of purpose? Sam Altman says, ‘People Will have to redefine what it means to contribute'
In a rare, thought-provoking conversation that danced between comedy and existential crisis, OpenAI CEO Sam Altman sat down with podcaster Theo Von on This Past Weekend. What unfolded was less a traditional interview and more a deeply human dialogue about the hopes, fears, and massive unknowns surrounding artificial intelligence. As AI continues its unstoppable advance, Von posed a question many of us have been quietly asking: 'Are we racing toward a future where humans no longer matter?' Explore courses from Top Institutes in Please select course: Select a Course Category Digital Marketing Data Science Data Analytics Artificial Intelligence others Project Management Leadership Management Operations Management Technology Product Management Cybersecurity CXO Design Thinking Public Policy Others Data Science Finance PGDM Degree Healthcare MBA MCA healthcare Skills you'll gain: Digital Marketing Strategy Search Engine Optimization (SEO) & Content Marketing Social Media Marketing & Advertising Data Analytics & Measurement Duration: 24 Weeks Indian School of Business Professional Certificate Programme in Digital Marketing Starts on Jun 26, 2024 Get Details Skills you'll gain: Digital Marketing Strategies Customer Journey Mapping Paid Advertising Campaign Management Emerging Technologies in Digital Marketing Duration: 12 Weeks Indian School of Business Digital Marketing and Analytics Starts on May 14, 2024 Get Details 'We're Still the Main Characters'—But for How Long? Altman didn't sugarcoat the situation. He agreed with many of Von's concerns, from data privacy to AI replacing jobs, and even the unnerving pace at which the technology is evolving. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Never Put Eggs In The Refrigerator. Here's Why... Car Novels Undo 'There's this race happening,' Altman said, referring to the breakneck competition among tech companies. 'If we don't move fast, someone else will — and they might not care as much about the consequences.' But amid all the alarms, Altman offered a cautious dose of optimism. 'Even in a world where AI is doing all of this stuff humans used to do,' he said, 'we are going to find a way to feel like the main characters.' His tone, however, betrayed a sense of uncertainty: the script isn't written yet. You Might Also Like: Telling secrets to ChatGPT? Using it as a therapist? Your AI chats aren't legally private, warns Sam Altman AI and the Crisis of Human Purpose Perhaps the most powerful moment came when Von bluntly asked: 'What happens to our sense of purpose when AI does everything for us?' Altman acknowledged that work has always been a major source of meaning for people. While he's hopeful that AI will free humans to pursue more creative or emotional pursuits, he conceded that the transition could be deeply painful. 'One of the big fears is like purpose, right?' Von said. 'Like, work gives us purpose. If AI really continues to advance, it feels like our sense of purpose would start to really disappear.' Altman responded with guarded hope: 'People will have to redefine what contribution looks like… but yeah, it's going to be unsettling.' You Might Also Like: Sam Altman wishes to give 'free GPT-5' to everyone on Earth: OpenAI CEO's bold dream sparks awe and alarm AI as Therapist? The Privacy Dilemma We Can't Ignore In what may be one of the most revealing admissions from a tech CEO, Altman addressed the disturbing trend of people — especially young users — turning to AI as a confidant or therapist. 'People talk about the most personal sh*t in their lives to ChatGPT,' he told Von. 'But right now, if you talk to a therapist or a lawyer or a doctor about those problems, there's legal privilege… We haven't figured that out yet for when you talk to ChatGPT.' With AI tools lacking legal confidentiality protections, users risk having their most intimate thoughts stored, accessed, or even subpoenaed in court. The privacy gap is real, and Altman admitted the industry is still trying to figure it out. A Legal Gray Zone and a Growing Cloud of Concern Adding to the complexity, Altman highlighted how the lack of federal AI regulations has created a patchwork of rules that vary wildly across states. This legal uncertainty is already playing out in real-time — OpenAI, for example, is currently required to retain user conversations, even deleted ones, as part of its legal dispute with The New York Times. 'No one had to think about that even a year ago,' Altman said, calling the situation 'very screwed up.'
