Alphabet reported a strong second quarter, with growth across its sprawling business, as the company’s aggressive push into artificial intelligence fuels its core products and newer bets, including cloud and autonomous driving. “Q2 was a standout quarter for us, with robust growth across the company,” Sundar Pichai, Alphabet’s chief executive, said during the company’s earnings call. “As you saw at I/O, we are leading at the frontier of AI and shipping at an incredible pace. AI is positively impacting every part of the business, driving strong momentum.”

Search, Google’s largest business, delivered double-digit revenue growth, aided by new features such as AI Mode, which launched in the United States and India. “AI Overviews now has over 2 billion monthly users across more than 200 countries and territories and 40 languages,” Pichai noted, adding that the company’s new AI features are prompting users to search more frequently, particularly among younger audiences.

At the same time, YouTube showed strength in both advertising and subscriptions, with the company reporting that Shorts, its short-form video product, now earns as much revenue per watch hour as traditional instream ads in the United States. “In some countries, it now even exceeds instream’s rate,” Pichai said.

Google Cloud, the company’s fastest-growing division, continued to benefit from what Mr. Pichai described as “significant demand for our comprehensive AI product portfolio.” The unit, which has an annual revenue run rate of more than $50 billion, has seen large customer deals double year-over-year, with the number of new Google Cloud Platform customers rising by nearly 28% quarter-over-quarter. “Nearly all gen AI unicorns use Google Cloud,” Pichai said.

The company’s focus on artificial intelligence extends beyond product launches to the underlying infrastructure that powers these offerings. “We operate the leading global network of AI optimized data centers and cloud regions,” Pichai said, emphasizing that the company’s investments in AI accelerators and optimized software packages are designed to meet growing demand while improving performance and efficiency.

Google’s Gemini models, which Pichai described as providing “industry-leading performance in nearly every major benchmark,” have been integrated across the company’s offerings, from Workspace to the Gemini App, which now has over 450 million monthly active users. In June alone, more than 50 million people used AI-powered meeting notes in Google Meet, and Google’s new video generation model, Veo 3, has been used to create over 70 million videos since May.

The company also highlighted continued momentum in Waymo, its autonomous driving unit, which launched in Atlanta last month while expanding its service areas in Austin, Los Angeles and the San Francisco Bay Area. “The Waymo Driver has now autonomously driven over 100 million miles on public roads,” Pichai said.

The company sees artificial intelligence as central to its future. “This is all possible because of the long-term investments we’ve made in our differentiated, full-stack approach to AI,” Pichai said. “This spans AI infrastructure; world-class research, models and tooling; and our products and platforms that bring AI to people all over the world.”

Alphabet Inc., Google’s parent company, reported strong financial results for the second quarter of 2025, surpassing Wall Street expectations. The company posted $96.4 billion in revenue, up 14% year-over-year. Earnings per share also rose 22% to $2.31, outperforming analyst estimates of $2.17–$2.20.

Google Cloud, Search, and YouTube Drive Alphabet’s Growth

Net income for the quarter climbed 19% to $28.2 billion, while the operating margin remained solid at 32.4%. Its core business units all saw double-digit growth:

Google Cloud revenue jumped 32%, hitting $13.6 billion. This growth was powered by demand for core cloud products, AI infrastructure, and generative AI services.

Google Services, which include YouTube ads, Google Search, and subscriptions, earned $82.5 billion, a 12% increase from last year.

YouTube ads alone generated $9.8 billion in revenue.

The company’s “Other Bets” segment, including Waymo and Verily, brought in $373 million, slightly up from $365 million last year. However, it reported a $1.25 billion operating loss, wider than last year’s $1.13 billion loss.

AI Takes Center Stage: Gemini and AI Overviews See Rapid Adoption

Alphabet’s AI tools are rapidly gaining traction:

AI Overviews, Google’s AI-powered search summaries, now reach over 2 billion monthly users in 200+ countries, up from 1.5 billion just a quarter ago.

The Gemini AI chatbot has surpassed 450 million monthly active users.

Interestingly, the company also announced an increase in its 2025 capital expenditure forecast to $85 billion, a $10 billion jump from its February projection. This uptick is driven by rising demand for cloud infrastructure and AI services.

CEO Sundar Pichai confirmed this, saying:

“We had a standout quarter, with robust growth across the company. We are leading at the frontier of AI and shipping at an incredible pace. AI is positively impacting every part of the business, driving strong momentum. Search delivered double-digit revenue growth, and our new features, like AI Overviews and AI Mode, are performing well. We continue to see strong performance in YouTube as well as subscriptions offerings. And Cloud had strong growth in revenues, backlog and profitability. Its annual revenue run-rate is now more than $50 billion. With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures in 2025 to approximately $85 billion and are excited by the opportunity ahead.”

GOOGL Stock Dips Despite Record Quarter

Still, Alphabet’s stock had a mild reaction. Some investors were worried about rising spending and growing competition from AI-powered search engines. This raised doubts about future returns and how efficiently the company is running.

Moving on, while these AI advancements are enhancing user engagement and search capabilities, they’re also driving up energy consumption. It’s becoming a growing concern for Alphabet’s sustainability efforts.

Let’s see how Google is balancing these two hand in hand.

Alphabet’s Record-Breaking Clean Energy Procurement

Alphabet remains committed to its climate moonshots, aiming to run its operations on carbon-free energy 24/7. In 2024, it procured over 8 GW of clean energy, the highest in company history and double the amount in 2023.

Since 2010, the company has signed more than 170 clean energy deals totaling over 22 GW, nearly equivalent to Portugal’s total renewable energy capacity.

These deals span across North America, Europe, Latin America, and the Asia-Pacific.

In Europe, Alphabet expanded its offshore wind projects in the Netherlands and added new PPAs in Italy, Belgium, and Poland. In Asia, it supported clean energy in India, Japan, Singapore, and Taiwan, customizing agreements to local market needs.

Energy Efficiency Across Data Centers: Small Improvements, Big Impact

Google or Alphabet is also focused on maximizing energy efficiency across its infrastructure. As per the company’s latest sustainability report, its global data center fleet reached a record low power usage effectiveness (PUE) of 1.09 in 2024. While the improvement from 1.10 may seem minor, it significantly reduces electricity consumption at Alphabet’s scale.

Their custom-designed high-performance servers and smart building technologies further optimize energy use. As a result, Google’s data centers now deliver over six times more computing power per unit of electricity than they did five years ago.

Tackling AI’s Energy Demand with Smarter Computing

With the rapid rise in AI workloads, Alphabet is adapting its infrastructure through “carbon-intelligent computing.” This system shifts computing tasks based on when and where the grid has cleaner energy, helping ease stress on local power networks and cut emissions.

The platform balances compute needs with local energy availability, ensuring users experience uninterrupted service whether they’re watching YouTube, using Google Maps, or interacting with Gemini.

SMRs and Geothermal: Bold Steps Toward 24/7 Clean Power

Alphabet is also leading the charge in advanced energy technologies. In 2024, it became the first company to sign corporate deals for nuclear power from Small Modular Reactors (SMRs). Partnering with Kairos Power, the company aims to add up to 500 MW of clean nuclear energy to U.S. grids by 2035. The first reactor is expected by 2030.

The tech giant also made progress with advanced geothermal projects, helping diversify its clean energy mix and offering reliable, around-the-clock power for its energy-hungry AI systems.

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Emissions: Progress, But Scope 3 Still Rising

Alphabet’s total ambition-based emissions reached 11.5 million metric tons CO₂e in 2024. While emissions from operations dropped due to cleaner energy use, Scope 3 emissions rose by 22%. It was driven largely by data center expansion and increased hardware production for AI.

Despite this, the company increased its carbon-free energy (CFE) usage across offices and data centers to 66%, and achieved at least 80% hourly CFE in 9 out of 20 global grid regions.

Expanding Carbon Removals

At the same time, Google is working to cancel out any remaining emissions by 2030 using a growing portfolio of carbon credits that deliver real climate benefits. The company is accelerating various carbon removal projects and forming strategic partnerships to reach its net-zero goal.

In 2024, Google expanded its carbon removal portfolio in a big way. It signed 16 new offtake agreements worth over $100 million, covering about 728,300 tonnes of CO₂ removal credits. This brought its total carbon removal portfolio to around 782,400 tonnes—a 14-fold jump compared to 2023.

Real-World Climate Impact at Scale

Alphabet’s sustainability efforts go beyond internal operations. In 2024, five of its products: Nest thermostats, Google Earth Pro, Solar API, fuel-efficient routing in Maps, and Green Light collectively helped reduce 26 million metric tons of GHG emissions. That’s more than twice Alphabet’s total annual emissions and equivalent to the yearly energy use of 3.5 million U.S. homes.

Alphabet Faces Key Challenges on the Road to Net-Zero

The company acknowledges that reaching net-zero emissions by 2030 is getting tougher. One big challenge is the slow progress in clean energy technology. For example, geothermal and small modular nuclear reactors (SMRs) remain costly and require additional government support to expand.

The problem is even more significant in emerging markets, such as the Asia-Pacific. Many of these areas still lack sufficient carbon-free electricity options to support Alphabet’s clean energy goals.

Thus, the road ahead is uncertain. AI’s rising energy demand, regulatory volatility, and slower-than-expected clean tech deployment pose serious challenges. For Alphabet, balancing innovation with climate responsibility remains a key test in the years leading to 2030.

The global AI and cloud computing race has entered a new phase, with Alphabet Inc. (GOOGL) placing a decisive wager on its future. The company’s recent $85 billion capital expenditure (CapEx) plan for 2025—a 13.3% increase from its 2024 forecast—underscores its commitment to securing leadership in artificial intelligence and cloud infrastructure. This aggressive spending, driven by surging demand for Google Cloud services and AI tools like Gemini, reflects a strategic pivot toward high-margin, high-growth technologies. But how should investors assess the long-term potential and risks of this bet?

The CapEx Surge: Fueling AI and Cloud Ambitions

Alphabet’s CapEx increase is not merely a response to market trends; it is a calculated move to address a $106 billion backlog in cloud demand and to accelerate the deployment of AI infrastructure. Two-thirds of the $85 billion will fund servers, while the remaining third targets data centers and networking equipment. This allocation prioritizes scalability for AI workloads, with custom-built Ironwood Tensor Processing Units (TPUs) offering a 10x performance boost over prior generations.

The financial implications are clear: free cash flow in Q2 2025 fell to $5.3 billion, a 61% year-over-year decline, as depreciation costs and server procurement strained short-term profitability. However, Alphabet’s cloud business has demonstrated resilience, with operating margins rising to 20.7% in Q2 2025 from 11.3% in Q2 2024. This suggests that the company is inching closer to monetizing its infrastructure investments, a critical factor for long-term returns.

Competitive Positioning: Navigating the Hyperscaler Wars

Alphabet’s rivals are equally aggressive. Microsoft’s $80 billion CapEx plan and Amazon’s $100 billion allocation highlight the intensity of the cloud and AI arms race. While AWS maintains a 29% global cloud market share, Alphabet’s Google Cloud trails at 12%. However, Google Cloud’s 32% year-over-year revenue growth in Q2 2025 outpaces the industry average, signaling its potential to disrupt the status quo.

Alphabet’s differentiator lies in its vertical integration strategy. By combining custom TPUs, Gemini AI models, and consumer data from Google Search, YouTube, and Android, the company is building a full-stack AI ecosystem. Strategic acquisitions, such as the $32 billion purchase of cloud security firm Wiz, further strengthen its enterprise appeal. Meanwhile, partnerships like OpenAI’s use of Google Cloud signal Alphabet’s growing influence in the AI developer community.

Risk-Reward Dynamics: Balancing Short-Term Costs with Long-Term Gains

The primary risk lies in the capital intensity of Alphabet’s strategy. With CapEx expected to rise further in 2026, near-term earnings pressure is inevitable. Competitors like Microsoft and Amazon, with larger cash reserves and more mature cloud businesses, could outpace Alphabet in monetization. Additionally, execution risks—such as delays in server deployment or slower AI adoption—could undermine the investment’s payoff.

Yet the potential rewards are substantial. The global AI infrastructure market is projected to exceed $320 billion in 2025, and Alphabet’s focus on high-margin cloud services and AI-driven innovation positions it to capture a significant share. The company’s ability to leverage consumer data for enterprise AI solutions, a unique advantage over rivals like Microsoft and Amazon, could drive sustained growth.

Investment Thesis: A Calculated Leap into the Future

For investors, the key question is whether Alphabet’s aggressive CapEx can translate into durable competitive advantages and shareholder value. Historically, Alphabet has excelled at turning infrastructure investments into long-term gains, as seen with its dominance in search and Android. The current AI and cloud push mirrors this playbook, albeit at a larger scale.

However, patience is required. The near-term financial trade-offs—reduced free cash flow and higher depreciation—must be weighed against the long-term potential of a $50 billion+ cloud business and a first-mover edge in AI. Investors with a five-to-ten-year horizon may find the risk-reward profile compelling, particularly if Alphabet can maintain its innovation pace and secure enterprise adoption of Gemini and other AI tools.

Conclusion: A High-Stakes Game with High Rewards

Alphabet’s AI and cloud bets are a high-stakes gamble, but one that aligns with the transformative potential of AI in the digital economy. While the road ahead is fraught with challenges, the company’s strategic agility, technological depth, and financial firepower make it a formidable player in the hyperscaler wars. For investors willing to tolerate short-term volatility, Alphabet’s aggressive CapEx could unlock outsized returns in an AI-driven future.

In the end, the success of this bet will hinge on execution: can Alphabet convert its infrastructure investments into scalable, profitable services? The answer will shape not only its stock price but the broader trajectory of AI innovation for years to come.

Google CEO Sundar Pichai gestures to the crowd during Google’s annual I/O developers conference in Mountain View, California, on May 20, 2025.

Alphabet reported second-quarter results on Wednesday that beat on revenue and earnings, but the company said it would raise its capital investments by $10 billion in 2025.

Shares of the company were up as much as 3% in after-hours trading.

Here’s how the company did, compared with estimates from analysts polled by LSEG:

Revenue: $96.43 billion vs. $94 billion expected

$96.43 billion vs. $94 billion expected Earnings per share: $2.31 vs. $2.18 expected

Wall Street is also watching several other numbers in the report:

YouTube advertising revenue : $9.8 billion vs. $9.56 billion, according to StreetAccount

: $9.8 billion vs. $9.56 billion, according to StreetAccount Google Cloud revenue: $13.62 billion vs. $13.11 billion, according to StreetAccount

$13.62 billion vs. $13.11 billion, according to StreetAccount Traffic acquisition costs (TAC): $14.71 billion vs. $14.18 billion, according to StreetAccount

The company’s overall revenue grew 14% year over year, higher than the 10.9% Wall Street expected, but Alphabet is going to spend more on artificial intelligence in 2025 than it anticipated.

In February, the company said it expected to invest $75 billion in capital expenditures in 2025 as it continues to expand on its AI strategy. That was already above the $58.84 billion Wall Street expected at the time.

The company increased that figure on Wednesday to $85 billion, saying it was raising it due to “strong and growing demand for our Cloud products and services.” The company expects to further increase capital expenditures in 2026, Alphabet finance chief Anat Ashkenazi said on an earnings call.

The company reported revenue of $13.62 billion for its cloud computing business, which is a 32% increase from a year ago. Last week, OpenAI announced that it expected to use Google’s cloud infrastructure for its popular ChatGPT service. Alphabet CEO Sundar Pichai said “we are very excited to be partnering with them.”

Alphabet’s net income increased to $28.20 billion, up nearly 20% from the previous year.

The company’s search and advertising units still showed growth in the second quarter despite AI competition heating up. The company’s search unit brought in $54.19 billion during the quarter, and its advertising revenue grew to $71.34 billion — up about 10.4% from $64.61 billion the year prior.

YouTube advertising revenue came in at $9.8 billion, higher than Wall Street expected.

The company said its “Other Bets” segment, which includes its self-driving car unit Waymo and life sciences unit Verily, brought in $373 million — up from $365 million a year ago. Other Bets reported a loss of $1.25 billion, up from the $1.13 billion a year ago.

AI Overviews, Google’s AI search product that summarizes search results, now has upward of two billion monthly users across more than 200 countries and territories, Pichai said during Wednesday’s earnings call. That’s up from 1.5 billion monthly users last quarter.

The Gemini app, which has the company’s AI chatbot, now has more than 450 million monthly active users, Pichai said.

When asked about large spending on AI talent, Ashkenazi said Alphabet makes “sure that we invest appropriately to have the best and brightest minds in the industry.”

Google made a splash in the AI talent wars, announcing earlier in July that it would bring in Windsurf CEO Varun Mohan and other top researchers at the AI coding startup as part of a $2.4 billion deal that also includes licensing the company’s technology.

Total operating expenses increased 20% to $26.1 billion, Ashkenazi said on Wednesday. The biggest driver of growth was expenses for legal and other matters due in part to a $1.4 billion charge related to a settlement, she said on Wednesday’s earnings call. Texas Attorney General Ken Paxton in May announced a $1.37 billion settlement with Google related to a data privacy rights lawsuit it made against the company in 2022.

Ashkenazi said Alphabet’s third-quarter revenue “could see a tailwind” due to several reasons. That includes a negative impact for advertising, which benefited from “strong spend on U.S. elections” in late 2024, particularly on YouTube, she said.

20 years ago, on April 23 2005, the first YouTube video was uploaded. The following year, Google acquired the platform in exchange for a share package worth 1.65 billion US dollars at the time. Today, YouTube stores 20 billion videos and an average of 20 million new videos are uploaded every day. This was stated by Alphabet’s CEO Sundar Pichai on Thursday as part of the announcement of the latest quarterly figures. The investment has paid off for the Google Group: Alongside the search engine called Google, YouTube is the strongest driver of the Group’s continued strong growth.

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While the search engine lives from advertising and the cloud business from subscriptions, YouTube stands on both feet: Anyone who can no longer stand the increasing flood of advertising but does not want to do without the videos has to pay a subscription. It promises to play “most” videos without advertising.

In the first three months of 2025, Google generated revenue of 77.3 billion US dollars, an increase of 6.9 billion dollars or 19 percent. 8.9 billion dollars in revenue was generated by advertising on YouTube alone, ten percent or 800 million dollars more than in the first quarter of 2024. Subscription revenue even increased by 19 percent or 1.6 billion dollars to 10.4 billion dollars; YouTube and Google One are the main drivers of subscription growth.

Advertising, which Google provides for third-party websites and apps, is the only shrinking segment: 7.3 billion dollars in quarterly revenue represents a decline of two percent. Google’s core is and remains its search engine: it exceeded the 50 billion dollar revenue mark in the quarter, reaching 50.7 billion dollars, an increase of ten percent or 4.5 billion dollars year-on-year. Insurance companies and retailers in particular have recently placed more advertising. However, the 50.7 billion dollars also includes other Google revenues.

Operating cash flow +25%

In addition to Google (including YouTube), the Alphabet Group as a whole also includes the separately reported Google Cloud (+28% revenue to 12.3 billion dollars) and Other Bets. The latter are risky ventures that do not yet generate significant revenue and often disappear into oblivion. Their turnover fell by a total of nine percent to 450 million dollars. This includes Waymo, whose self-driving cars now carry out 250,000 paid passenger journeys per week in Arizona, California and Texas, according to Pichai. Atlanta in the US state of Georgia is to be added this year, followed by Miami and Washington, DC next year.

In total, Alphabet generated revenues of 90.2 billion dollars in the first quarter of 2025, an increase of twelve percent. Of this, 30.6 billion dollars remained as operating profit (+20%). Operating cash flow even increased by a quarter to 36.2 billion dollars.

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It is striking that Google Cloud more than doubled its operating profit from 900 million dollars to 2.2 billion dollars. Google’s operating profit increased by 17 percent to 32.7 billion dollars. Meanwhile, operating losses in Other Bets widened by 20 percent to 1.2 billion dollars. Waymo’s autonomous motorized trucks are obviously not yet profitable.

Stock bets are paying off

Alphabet’s investments in shares of other companies are doing even better than the actual business. While Alphabet’s interest income remained stable at one billion dollars in the quarter and investments in bonds were profitable (202 million dollars profit after 462 million dollars loss), book profits from shares have virtually exploded: 9.8 billion dollars have been generated. This is more than four times the figure for the same quarter of the previous year and even 31 percent more than the figure for the full year 2024. Alphabet does not, however, disclose what proportion of the securities gains was realized and what proportion was only on paper as at the reporting date of 31 March.

In total, the data company almost quadrupled its other quarterly profits to 11.2 billion dollars. Together with the operating profits, this results in a pre-tax profit of 41.8 billion dollars (+48%). Alphabet increased its tax provisions by 56 percent to 7.2 billion dollars. All in all, net income increased by 46 percent to 34.5 billion dollars.

“We are pleased with our strong results this quarter,” said Pichai to the financial analysts. Nevertheless, the management is only increasing the dividend by five percent or one US cent to 21 cents per share. In return, a new share buyback program worth 70 billion dollars will be launched. Institutional investors like it, Google shares rose almost five percent in after-hours trading following the announcement of the quarterly figures.

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Don’t miss any news – follow us on Facebook, LinkedIn or Mastodon. This article was originally published in German. It was translated with technical assistance and editorially reviewed before publication.