Alphabet Exceeds Q2 Forecast, Increases AI and Cloud Expenditure to $85 Billion in 2025
Alphabet Inc., Google's parent company, reported its widely watched second-quarter earnings on Wednesday, exceeding Wall Street estimates in all respects and marking an aggressive bet on AI and cloud spending. The technology giant not only posted better-than-expected revenue and profit but also boosted its 2025 capital expenditure guidance to a whopping $85 billion—$10 billion higher than its February target.
Strong Financial Results
Alphabet's Q2 revenue was \$96.43 billion, ahead of the street's \$94 billion estimate. EPS was \$2.31, ahead of the estimated \$2.18. The numbers reflect the strength and resilience of Alphabet's growth momentum amidst an ever-more-artificially intelligent tech ecosystem.
Revenue growth was 14% year-over-year, far exceeding Wall Street's forecast of 10.9%. This is one of Alphabet's best quarters in recent history and indicates that its bets on cloud and artificial intelligence are beginning to generate returns.
Alphabet's net income was up at $28.2 billion, a 20% rise over last year. Operating costs rose by 20% too, to $26.1 billion, with the notable $1.4 billion legal settlement charge on data privacy.
AI and Cloud in the Limelight
CEO Sundar Pichai prioritised Alphabet's intense concentration on artificial intelligence and cloud infrastructure. The firm posted $13.62 billion in revenue from Google Cloud, up 32% year-over-year. The push is strengthened by OpenAI's recent declaration that it will utilise Google's cloud infrastructure for its popular ChatGPT offering.
Our Cloud products are seeing strong and increasing demand," Pichai said, justifying the \$85 billion plan for capital spending. This updated figure not only surpasses earlier projections by \$10 billion but also dwarfs Wall Street's earlier estimate of \$58.84 billion.
Pichai also announced that the Gemini app, Google's chatbot powered by AI, has hit 450 million monthly active users, and AI Overviews, Google's AI search summary feature, now supports over 2 billion monthly users in over 200 nations.
Advertising and YouTube Remain Powerhouses
Despite concerns over AI competitors disrupting traditional search and ad models, Google’s advertising revenue hit $71.34 billion, up from $64.61 billion last year. The search unit generated $54.19 billion, showing continued dominance.
YouTube advertising contributed $9.8 billion, exceeding analysts’ estimates and reinforcing the platform's strength even as newer content platforms emerge.
Other Bets and Legal Challenges
Alphabet's "Other Bets" unit—which also comprises autonomous vehicle arm Waymo and biotech business Verily—reported $373 million in revenue, up slightly from $365 million last year. It still had a loss of $1.25 billion.
On the regulatory front, Alphabet remains under the microscope. Much of its higher operating costs come from a $1.4 billion charge related to a settlement with Texas on a data privacy lawsuit.
Alphabet Sees Q3 Tailwinds
In the future, CFO Anat Ashkenazi added that Q3 can look forward to "tailwinds," though growth will be muted by the waning impact of high political ad spend from the 2024 U.S. elections.
With its stock rising almost 3% in after-hours trading and significant investments on the horizon for AI and cloud infrastructure, Alphabet is telling investors and competitors alike: it's not letting up.
Frequently Asked Questions (FAQ)
Why did Alphabet increase its capital expenditure projection to $85 billion for 2025?
Alphabet raised its capex guidance to $85 billion as it sees increasing global demand for its cloud products and services and the necessity to expand infrastructure to accommodate AI workloads.
How much were Alphabet's total revenue and earnings per share in Q2 2025?
Alphabet posted $96.43 billion in revenue and $2.31 EPS, both higher than Wall Street expectations.
How is Google's cloud business doing?
Google Cloud accounted for $13.62 billion in Q2, a 32% year-to-year growth. The growth was assisted by new customers such as OpenAI moving to the infrastructure of Google.
Where are Alphabet's AI offerings, such as Gemini and AI Overviews, currently?
The Gemini AI chatbot currently has more than 450 million monthly active users, and AI Overviews reaches over 2 billion users worldwide from 200+ nations, demonstrating accelerated adoption.
How much were Alphabet's legal costs this quarter?
Alphabet took a $1.4 billion charge related to a settlement of a 2022 privacy suit brought by Texas, as part of the company's 20% increase in operating costs.
