Alphabet Shares Climb as AI Sparks Revenue Growth and Expanded Investment Plans

Alphabet (NASDAQ:GOOGL) saw its shares climb over 2% in early U.S. trading on Thursday following stronger-than-expected second-quarter earnings and an upward revision of its capital expenditure forecast for 2025.

The parent company of Google reported earnings per share of $2.31, surpassing analyst predictions of $2.17. Quarterly revenue hit $96.43 billion, well above the consensus estimate of $93.9 billion.

Alphabet now anticipates its capital spending to reach roughly $85 billion in 2025, increasing from the previous projection of $75 billion. This adjustment reflects an aggressive push into artificial intelligence and cloud infrastructure, outpacing analyst expectations of $73.31 billion and marking a 13.3% rise from the prior year.

Google has recently integrated AI into its search platform to stay competitive against emerging rivals such as OpenAI and Perplexity.

AI is also proving to be a significant growth driver in Alphabet’s advertising business, enabling the company to offer advertisers campaigns with enhanced return potential. Advertising revenue for the quarter rose 10.4% year-over-year to $71.3 billion, while the core search segment expanded by 11.7%.

CEO Sundar Pichai highlighted the quarter’s “robust growth across the company,” pointing to strong momentum in search, YouTube, and the cloud division, which now boasts an annualized revenue exceeding $50 billion. The cloud business, providing computing services for data centers, reported a 32% sales increase to $13.6 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,” Pichai stated.

During the earnings call, Pichai emphasized AI’s impact on search: “AI Mode has launched in the U.S. and India, and is going well, while AI Overviews now has over 2 billion monthly users across more than 200 countries and territories and 40 languages.” He added that AI Overview, designed to synthesize search results beyond traditional website links, is driving over 10% more queries worldwide for the search types where it appears, with growth continuing to rise over time.

Pichai also noted that Waymo, Alphabet’s autonomous vehicle unit, is expanding rapidly and has now logged over 100 million miles autonomously on public roads. The service is currently testing in more than 10 cities this year, including New York and Philadelphia.

“AI is driving momentum across [Alphabet’s] business units, and management also signaled that it has been additive to queries,” KeyBanc analysts commented. “While capex was indicated higher, our sense is that Alphabet is reinvesting from a position of strength.”

Alphabet stock price

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