“AI is positively impacting every part of the business, driving strong momentum,” CEO Sundar Pichai said in a statement. The company highlighted growth in its advertising and cloud businesses, as well as the rollout of new AI tools.
Google Cloud posted strong growth, with revenue up 32 percent to $13.6 billion. Search and other advertising generated $54.2 billion, a 12 percent increase from last year. YouTube ads brought in $9.8 billion.
Despite the upbeat earnings, Alphabet shares remained mostly flat after the announcement. One reason is that the company said it would increase capital expenditures by $10 billion, bringing the full-year total to $85 billion. The funds will go toward expanding AI infrastructure and data centers.
Earlier this year, Alphabet shares had fallen as much as 25 percent over concerns about the company’s position in the growing AI market. Google’s dominance in online search, its biggest revenue driver, is being challenged by AI-powered platforms like OpenAI’s ChatGPT. Analysts estimate ChatGPT handles 15–20 percent of Google’s daily search volume.
In response, Google has accelerated AI development. It recently launched AI Mode in Search, a chatbot-like interface similar to ChatGPT, and expanded AI Overviews to over 2 billion monthly users. These features aim to keep users within Google’s ecosystem while adapting to the shift in how people seek information.Still, competition is intensifying. Gene Munster of Deepwater Asset Management said in a note that Google is working hard to send one clear message: “AI is a tailwind for search, not a headwind.”The strong quarter comes as Alphabet faces legal pressure. A federal judge in Washington, DC, recently ruled that Google violated antitrust laws. A decision on potential remedies, including a proposed breakup of parts of Google’s business, is expected before Labor Day.
