Alphabet quadruples profit to $112 billion, boosted by AI Investments

Alphabet, the parent company of Google, said on Wednesday that its investments in artificial intelligence are paying off and driving growth across its businesses, amid broader questions about whether tech companies’ enormous spending on the powerful technology can be justified.

The Silicon Valley giant, which has spent billions developing cutting-edge artificial intelligence models and building data centers to provide computing power for the technology, said revenue for the three months ended in June reached $119.8 billion, up 24 percent from a year earlier. In particular, Google’s cloud business, which allows companies to rent computing power and AI tools, grew 82 percent to $24.8 billion.

Profit rose to $112.1 billion, quadrupling from $28.2 billion a year earlier, helped by the big investments Google has made in recent years in other AI-related companies such as SpaceX and Anthropic. Profits associated with those investments were valued at about $99 billion, Google said, and contributed $77 billion to overall profits, especially when SpaceX went public in June.

Google also said it will spend more than previously predicted to build out data centers and other technologies for AI development. It estimates spending will reach $195 billion to $205 billion this year, more than double last year’s $85 billion and more than an earlier projection of $190 billion.

“Our investments in artificial intelligence are redefining what’s possible in every part of our business,” said Sundar Pichai, CEO of Alphabet. he said in a statement.

The results beat Wall Street projections of $116.5 billion in revenue and $35 billion in profit.

Google has been racing to be the leader in AI as the technology transforms jobs, workplaces and the company’s own internet search business. To compete with rivals like OpenAI and Anthropic, Google said in June that it would increase $80 billion to fund its data center projects by selling its stock before raising its overall spending forecast on Wednesday.

Some have questioned whether such spending is excessive. Last week, stock markets fell on fears of growing AI competition from China after Chinese start-up Moonshot AI released AI technology that was nearly as powerful as Anthropic’s US flagship Claude Fable 5.

Artificial intelligence has benefited Google’s business so far. The company has incorporated AI into search, with its Gemini chatbot generating answers and users assigning AI “agents,” or bots, to perform 24/7 searches on their behalf. YouTube advertisers have new AI tools, and viewers have AI-generated video recommendations. And companies are clamoring to use Google’s cloud computing services to run their AI projects.

Google is “one of the best-placed AI companies around,” said Brian Nowak, an analyst at Morgan Stanley.

Demand for Google’s AI services is so intense that the company can’t keep up. Google said its cloud business has a backlog of potential contracts totaling $514 billion, up from $106 billion a year ago. More than half of that backlog will be processed over the next two years, said Anat Ashkenazi, Google’s chief financial officer.

Revenue from Google’s ad business rose 14.4 percent to $81.6 billion in the quarter as users flocked to YouTube and search.

In May, the company expanded its AI search offerings, revamping its iconic search panel for the first time in 25 years with new AI tools and adding the ability for people to assign 24/7 searches to AI agents that can act autonomously and act as digital personal assistants. The artificial intelligence infusion has attracted users, with the company saying its AI-mode chatbot-style search feature has reached one billion monthly active users.

Google’s subscriptions, which include users who pay for YouTube services and those who pay to use Google’s artificial intelligence, rose 15 percent to $12.9 billion. Gemini, the AI ​​company’s flagship, has reached 950 million monthly active users and has tripled its daily users over the past year, Google said.

The World Cup soccer tournament also helped search and YouTube, the company said, with search seeing the most traffic ever during the event and 1.7 billion people watching World Cup-related clips on YouTube. “This really highlights how much people are turning to Google in the moments that matter,” Mr. Pichai said.

On Tuesday, Google introduced three models of artificial intelligence that are supposed to work more efficiently and at a lower cost than previous versions. The company’s flagship model, the Gemini 3.5 Pro, was supposed to be released in June but was not made available. Mr Pichai said the Pro model remained in testing and that the company was also testing another model, the Gemini 4.

He admitted that Google’s models have lagged behind those of competitors, especially when it comes to coding, but said he expects Gemini 4 to help the company compete.

“There are many attributes where we are still on the edge,” Mr. Pichai said.