Alphabet Boosted by AI, Cloud Demand as Spending Needs Jump

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Google’s parent company, Alphabet Inc., said that demand for artificial intelligence products boosted its quarterly sales, and now requires an extreme increase in capital spending to keep up in the AI race, Bloomberg reported. For 2025, the company stated its capital expenditure will be $85 billion—$10 billion more than previously forecast.

In a post-earnings company call on July 23, CEO Sundar Pichai said, “Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers,” adding that top talent in the field wants to “really be at the frontier driving progress,” besides craving access to computing power and talented peers. He went on to say, “It’s a combination of all of that and using it to drive impact. And I think we are pretty competitive on all those fronts.”

As Microsoft Corp., startup OpenAI, Meta Platforms Inc., and others continue to pour money into AI, Alphabet must keep apace. “Google’s hand is forced by OpenAI to spend tremendously on AI’s infrastructure and applications,” said Nikhil Lai, an analyst at Forrester, told Bloomberg.

In its second-quarter earnings, Google reported that cloud revenues increased by 32% to $13.6 billion in the period, CNBC reported. The demand is so high for Google’s cloud services that it now amounts to a $106 billion backlog, Alphabet CFO Anat Ashkenazi shared during the same call. “It’s a tight supply environment,” she said.

Alphabet spent most of its capital during Q2 on tech infrastructure, according to Ashkenazi. Roughly two-thirds went to servers, and the rest went to data centers and networking equipment. She added that spending would increase next year, but gave no further details.

Alphabet shares rose as much as 4.1% after markets opened in New York on July 24—its biggest intraday gain in two months.