Alphabet’s Q2 revenue beats estimates as cloud computing surges

Alphabet beat Wall Street estimates for its second quarter on Wednesday, and cited massive demand for its cloud computing services as it hiked its capital spending plans for the year to about $85 billion.

The search giant beat estimates for quarterly revenue and profit on the back of new AI features and a steady digital advertising market. Google Cloud’s revenue growth surged nearly 32%, well above estimates for a 26.5% increase.

“With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures,” CEO Sundar Pichai said in an earnings release.

Shares of the company, which have risen more than 18% since its previous earnings report in April, were down 1% in extended trading.

Google had earlier pledged about $75 billion in capital spending this year, part of the more than $320 billion that Big Tech is expected to pour into building AI capabilities.

The companies have defended their aggressive AI spending amid rising competition from Chinese rivals and investor frustration with slower-than-expected payoffs, saying those massive investments are necessary to fuel growth and improve their products.

Alphabet reported total revenue of $96.43 billion for the second quarter ended June 30, compared with analysts’ average estimate of about $94 billion, according to data compiled by LSEG.

Google’s advertising revenue, which represents about three-quarters of the tech major’s overall sales, rose 10.4% to $71.34 billion in the second quarter, beating expectations for $69.47 billion, according to data from LSEG.

—Deborah Sophia and Kenrick Cai, Reuters