Google parent Alphabet posts steady Q2 results, boosts capex to meet soaring AI, cloud demand

Google parent Alphabet has posted solid second-quarter 2025 results, driven by AI innovations integrated into its search and cloud operations. The company raised its full-year capital expenditure forecast by $10 billion to $85 billion, citing strong demand for its cloud offerings.

The California-based company’s net profit in Q2 rose 19.4% to $28.2 billion, up from $23.6 billion in the year-ago period. Revenue for the quarter surged 13.8% to $96.4 billion, compared to $84.7 billion a year ago. 

Speaking about the company’s results during the second quarter earnings call, Sundar Pichai, Chief Executive Officer of Alphabet and Google, said, “Q2 was a standout quarter for us with robust growth across the company…AI is positively impacting every part of the business, driving strong momentum.”

“This quarter, search delivered double-digit revenue growth,” Pichai noted, adding that AI Mode, launched in the US and India, is performing well, while AI Overviews now attract over two million monthly users across more than 200 countries and territories, and are available in 40 languages.

The majority of Alphabet’s revenue continues to come from Google advertising. In the second quarter, its ad revenue, including Google Search, YouTube ads, and Google Network, rose 10.4% YoY to $71.3 billion.

The company’s revenue from Google search, its largest business, increased 11.7% to $54.2 billion in Q2. Meanwhile, YouTube ad sales climbed 13.1% to $9.8 billion during the quarter.

Prioritising AI development

In line with broader industry trends, Google has made artificial intelligence (AI) a strategic priority, consistently expanding its AI capabilities and integrating them across its core products.

The company has continued to develop the Gemini 2.5 family of hybrid reasoning models and recently introduced Flash Lite for faster performance. According to CEO Pichai, these models have driven strong momentum, with nine million developers now building for Gemini. 

Google’s video generation model, VO3, has seen rapid adoption, with over 70 million videos created since May. A new feature to convert photos into videos is now live in the Gemini app and is rolling out to Google Photos.

Pichai said that AI Mode in Search, which is still being rolled out, already has over 100 million monthly active users in the US and India. He added that the company plans to introduce new features, including the advanced research tool Deep Search and more personalised responses.

Tech giants such as Google, Microsoft, Amazon, and Meta have sharply increased capital expenditure (CapEx) to scale up their server and data centre infrastructure, responding to the rapid growth of AI and its intensive computing demands.

In the second quarter, Alphabet’s CapEx was $22.4 billion, with the vast majority of it invested in technical infrastructure, with approximately two-thirds of investments in servers and one-third in data centres and networking equipment, according to Chief Financial Officer Anat Ashkenazi.

Cloud and beyond

“Cloud had another great quarter of strong growth in revenues, backlog, and profitability. Annual revenue run rate is now more than $50 billion. We are seeing significant demand for our comprehensive AI product portfolio,” Pichai highlighted.

Google’s cloud business witnessed a 31.7% YoY jump in revenue, touching $13.6 billion in Q2. Operating income in the cloud division surged to $2.8 billion, growing 141.1% YoY.

Google remains a key player in the cloud computing industry, competing with Amazon Web Services (AWS) and Microsoft. Amazon held a strong 29% share of the global market in Q1 2025, while Microsoft and Google recorded higher percentage growth numbers YoY, reaching 22% and 12%, as per data from Synergy Research Group.

According to the research firm, AI is having a significant impact, with generative AI services growing by 140–160%, and also driving improvements and additional growth across the wider service portfolio. Since the launch of ChatGPT and the rise of generative AI, the cloud market has grown significantly—it has expanded by 52% since the end of 2022.

Speaking about Alphabet’s increase in CapEx, CFO Ashkenazi noted, “Our updated outlook reflects additional investment in servers, the timing of delivery of servers, and an acceleration in the pace of data center construction, primarily to meet cloud customer demand. Looking out to 2026, we expect a further increase in CapEx due to the demand we are seeing from customers as well as growth opportunities across the company.”

During the period, Other Bets, encompassing the Waymo self-driving car business, witnessed a slight increase in revenue, to $373 million. The division incurred a loss of $1.1 billion.

“Within Other Bets, we are allocating more resources to businesses like Waymo, where we see opportunities to create additional value,” Ashkenazi said.

She said the company expects some headcount growth in 2025, particularly in key investment areas, with a sequential increase in total hires partly driven by the onboarding of new graduates in the third quarter. As of March 31, 2025, Alphabet’s employee count was 185,719.