Alphabet Inc. reported significant revenue growth in the second quarter but stated that capital expenditures in 2025 would be $10 billion higher than the previous forecast, increasing pressure on the company to justify the investments it is making to keep up in the artificial intelligence race, UNN reports with reference to Bloomberg.
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Shares fell about 1.6% in late trading on Wednesday after the search giant, which owns Google, said capital expenditures would rise to $85 billion. Sales for the second quarter, excluding payments to partners, rose to $81.7 billion, the company said.
Google's core search advertising business and growing cloud business have been the drivers supporting its significant AI spending. Google's cloud computing unit reported an operating profit of $2.83 billion. Google remains third in the cloud computing market after Microsoft and Amazon.com Inc. The unit is widely seen as Alphabet's most powerful source of growth.
"While the increase in spending underscores Alphabet's commitment to maintaining a competitive edge in new technologies, it also raises concerns about the potential impact on short-term profitability," said Jesse Cohen, senior analyst at Investing.com.
However, Alphabet has little choice, said Nikhil Lai, an analyst at Forrester: "OpenAI is forcing Google to spend huge amounts on infrastructure and AI applications."