Alphabet boosts AI spending as Google Cloud growth speeds up

In short: Alphabet is putting tens of billions more into AI computers and facilities, and it says Google Cloud is growing faster because customers want AI services.

What happened

Alphabet, Google’s parent company, reported strong revenue growth and pointed to artificial intelligence as a big reason. The company said quarterly revenue reached $119.8 billion, up 24% from a year earlier.

Alphabet also said it plans to raise about $80 to $85 billion in equity capital to fund more AI infrastructure. That includes data centers (large buildings full of computers), custom chips (special processors), and the computing capacity needed to run AI systems.

The company raised its expected annual capital spending to $180 to $190 billion, largely tied to AI and global computing. Executives, including CEO Sundar Pichai and CFO Anat Ashkenazi, have described AI as a core focus that is affecting search, ads, cloud services, and paid subscriptions.

Google Cloud was the clearest standout. Alphabet said demand for AI services is pushing up both cloud revenue and backlog, which is the value of contracted work that has not been counted as revenue yet (like a queue of pre-booked orders). In a recent report, cloud revenue reached $24.8 billion for the quarter and grew 82%, and backlog was reported at $240 billion, with other reports putting it even higher.

Why it matters

This spending can shape how quickly new AI features show up in products people already use, like Google Search and business tools. It also affects electricity use and construction because more data centers are needed. Investors will be watching whether the higher spending keeps paying off, especially in Google Cloud.

Source: NYTimes