Alphabet Inc topped projections for quarterly revenue and outlined an ambitious capital spending plan, far surpassing predictions, leveraging its growth to build out the data centers and infrastructure needed to lead in the artificial intelligence (AI) age.
Google’s parent company said capital expenditures will reach as much as US$185 billion this year, compared with the US$119.5 billion analysts expected. Last quarter’s sales, excluding partner payouts, were US$97.23 billion, surpassing the US$95.2 billion average estimate, with profit rising 30 percent from the prior year to US$34.5 billion, or US$2.82 per share.
Expected spending for this year will total more than what the Internet search giant spent in the three prior years combined. But Alphabet chief executive officer Sundar Pichai reassured investors that the costs are necessary. “We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” he said on Wednesday in a statement. “Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”
Photo: Dado Ruvic, Reuters
Google Cloud revenue in the recent period jumped 48 percent year-on-year to US$17.7 billion, beating the US$16.2 billion analysts expected, and Gemini, its AI model, is rapidly reaching new users, Alphabet said.
Google has raced to reinvent its business for the AI age, working to keep consumers in the habit of going to its search page even when they could also go to chatbots from rivals like OpenAI. The company has quickly improved its Gemini model and integrated it across products — an effort that has required massive investment in data centers and chips for model improvement and cloud customers.
The company has said its massive investments in AI — funding new infrastructure, research and talent — are essential for competing against rivals including Amazon.com Inc, Microsoft Corp and OpenAI.
About 40 percent of the company’s technical infrastructure investments were tied to data centers and networking equipment, while 60 percent were tied to servers, Alphabet chief financial officer Anat Ashkenazi said on a conference call to discuss earnings. Pichai acknowledged that the company would have to plan for constraints on what would be possible, including those of power and supply chains.
To justify its heavy spending, Alphabet continued to demonstrate momentum in its cloud and search advertising businesses. The company has been incorporating Gemini 3, its latest model, in all its products, including its Chrome browser. The Gemini app also saw 750 million active users through December last year, compared with 650 million in the three-month period ending in September. Backlog for the cloud business — or revenue under contract but not yet booked — more than doubled year over year, reaching US$240 billion, Pichai said on the call.
“The increase in backlog was driven by strong demand for our cloud products, led by our enterprise AI offerings from multiple customers,” Pichai added. Gemini Enterprise has more than 8 million paid users, after launching four months ago.
The industry has also leaned on Google’s progress. Alphabet is supplying up to one million of its specialized AI chips to Anthropic PBC, cementing Google’s position as a key infrastructure provider in the AI space. Gemini will also be a provider of AI for Siri on Apple Inc’s iPhones. Ashkenazi also said AI agents are already writing about 50 percent of Google’s own code.
Alphabet’s Other Bets, which includes self-driving car company Waymo and other ventures, reported US$370 million in fourth-quarter revenue, down from last year, while posting an operating loss of US$3.6 billion. That compared with analysts’ projection for a loss of US$1.3 billion.
Alphabet also said its research and development expenses went up by 42 percent, driven by compensation for AI talent and supporting Waymo.
YouTube, Google’s video-streaming platform, also showed momentum, with Shorts, the video format that competes with Instagram Reels and TikTok, averaging 200 billion daily views,
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