Alphabet (GOOGL) shares reversed course and turned higher in late trading Wednesday after the company posted strong second-quarter earnings and revealed an aggressive increase in capital expenditures.
Alphabet reported second-quarter revenue of $96.43 billion, surpassing Wall Street expectations on the back of surging demand for its cloud services and AI-powered products. Google Cloud led the charge with revenue growth of nearly 32%, well above analyst forecasts of 26.5%, driven by increased enterprise adoption of its AI offerings.
The company also announced a significant increase in capital expenditures, raising its 2025 spending target to roughly $85 billion—up from the previously guided $75 billion. The investment is aimed at scaling cloud infrastructure and accelerating AI development as competition intensifies across the tech sector.
“With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures,” CEO Sundar Pichai said in the earnings release.
Alphabet’s strong Q2 performance, which also included a solid showing from its core advertising business, initially sent shares lower in after-hours trading before rebounding on optimism around the company’s cloud momentum. The stock is up more than 18% since its last earnings report in April.
Still, the unexpected capex boost caught some investors off guard. “I don’t think anyone was expecting a change to that 2025 capex guide,” said Dave Wagner, portfolio manager at Aptus Capital Advisors. “Google had an amazing quarter. It was an easy beat, and it was just offset by this $10-billion increase in capex.”
Alphabet’s revised spending plans reflect a broader trend among Big Tech firms, which are collectively projected to invest over $320 billion this year to expand AI infrastructure. Though Google Cloud still trails Amazon Web Services and Microsoft Azure in total revenue, Alphabet continues to close the gap by leveraging its AI chips and custom solutions to win enterprise clients.
Despite the blowout numbers, investors were briefly rattled by Alphabet’s decision to raise its 2025 capital spending forecast from $75 billion to roughly $85 billion — a $10 billion jump that surprised many on Wall Street.
“I don’t think anyone was expecting a change to that 2025 capex guide,” said Dave Wagner of Aptus Capital Advisors.
CEO Sundar Pichai said the increase reflects “strong and growing demand” for Google Cloud’s AI-enhanced products and services.
Alphabet, like its Big Tech peers, is ramping up AI investments to stay competitive, especially amid growing pressure from Chinese tech firms and investor scrutiny over monetization timelines.
Notably, OpenAI recently added Google Cloud to its list of capacity providers — a surprising move given OpenAI’s close ties to Microsoft. While the increased spending raises short-term profitability concerns, analysts agree the strategic investment in AI infrastructure is a critical play to drive long-term growth.
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