Alphabet significantly exceeds expectations and invests more billions in AI

The various divisions of the Google Group Alphabet have grown much more strongly than observers had expected over the past three months. The most important Google divisions have even seen double-digit percentage increases in revenue. At the same time, the data company feels compelled to invest more money in artificial intelligence (AI), a lot more. Alphabet is increasing its AI investments for this year by an additional 10 billion US dollars.

At the beginning of February, when Alphabet achieved a net profit of over 100 billion US dollars for the first time, Alphabet and Google boss Sundar Pichai had budgeted 75 billion dollars for capital investments in the current year. The AI boom is hungry for powerful servers. In 2024, this expenditure had already risen by 63 percent compared to 2023, and Pichai wanted to increase this by almost 50 percent in 2025. Just under six months later, however, this was apparently not enough. The company is now increasing its AI investments for 2025 to around 85 billion dollars.

According to a company statement, Pichai justifies the higher expenditure with "strong and growing demand for its own cloud products and services". In a conference call, Alphabet CFO Anat Ashkenazi added that these investments are expected to increase further in 2026. When asked, Ashkenazi also assured CNBC that Alphabet is "investing appropriately to have the best and brightest minds in the industry". In the battle for the best AI employees, the company has only just scored a success. After the Windsurf takeover by OpenAI fell through, bosses and developers moved to Google.

Double-digit growth in turnover and profit

Alphabet can afford the higher expenditure, as turnover and profits in many areas of the Group increased significantly in the second quarter of this year. In the quarter ended June, total revenue increased by 14 percent year-on-year to 96.4 billion dollars, whereas the stock market had expected 94 billion dollars. Operating profit even increased by 32 percent year-on-year to 31.3 billion dollars. Net profit grew by 19 percent to 28.2 billion dollars.

The biggest growth within the Group was achieved by the Google Cloud. This division was able to increase its revenue by almost 32 percent year-on-year to 13.6 billion dollars. In the future, Google servers will also count for ChatGPT, as the company was able to secure an order from OpenAI for cloud capacities in June, as reported by Reuters. OpenAI apparently no longer wants to rely solely on Microsoft, its largest investor, and is therefore cooperating with one of its competitors in the AI sector in future.

AI is one of the main topics in Alphabet's largest division, Google services such as the search engine and YouTube. Here, the Group generated a multiple of the cloud division's revenue, most recently 82.5 billion dollars - 11 percent more than in the previous year. Alphabet recently earned 9.8 billion dollars from YouTube advertising. This is an increase of 13 percent compared to 2024 and also higher than market observers, who had expected 9.56 billion dollars.

Search engine successful with AI, says Google

Despite increased competition from AI offerings, the Google search engine continues to grow. It was able to increase its revenue by almost 12 percent year-on-year to 54.2 billion dollars. Google is also relying more heavily on AI. CEO Pichai proclaims that the AI overviews offered by the search engine are available in over 200 countries and have more than 2 billion users per month. Google users can hardly avoid the AI overviews, as they are often displayed automatically. In addition, Google's own AI chatbot Gemini now has more than 450 million monthly active users, according to Pichai.

Alphabet expects a negative impact on advertising revenue in the current third quarter, as this benefited from the US elections last year. YouTube in particular saw a large number of bookings. Investors initially reacted cautiously to Alphabet's quarterly figures, but the share price recovered after the close of trading and was recently up almost two percent.

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