Alphabet has significantly increased its capital spending forecast, now projecting expenditures between $195 billion and $205 billion for the year. The move follows a record-breaking quarter for its cloud computing division, which saw revenue leap 82% to $24.8 billion, far exceeding analyst expectations.
Finance Chief Anat Ashkenazi stated that demand for AI capacity continues to outpace the company's massive investment. The spending surge is fueled by enterprises racing to secure infrastructure for developing and running AI models.
Despite the cloud strength, the company faces competitive pressure in AI development. CEO Sundar Pichai acknowledged areas for improvement, particularly in coding tools, as rivals like Anthropic and OpenAI advance. The delayed launch of the flagship Gemini 3.5 Pro model has also raised concerns on Wall Street.
Google's core search business remains a bright spot. AI-driven features like AI Overviews are boosting user engagement and allowing the company to expand advertising within those tools. The robust search and cloud performance come amid a broader industry trend of massive AI investment, with Big Tech spending projected to exceed $1 trillion next year.