Google's latest earnings call offered a familiar message: AI is driving growth, and it's also getting more expensive.
On Wednesday, Alphabet reported second-quarter revenue of $119.8 billion, up 24% from a year earlier, while Google Cloud posted another blockbuster quarter as enterprises raced to adopt AI. At the same time, executives made it clear the company is prepared to spend even more to meet surging demand.
Here are the three biggest takeaways from Alphabet's earnings.
Google is spending more on AI and is willing to sacrifice margins #
Google is prioritizing long-term AI growth over short-term profitability by doubling down on its AI buildout.
The company raised its 2026 capital expenditure forecast to between $195 billion and $205 billion, up from a previous outlook of up to $190 billion, saying demand for AI infrastructure continues to exceed available capacity.
Finance chief Anat Ashkenazi said during Wednesday's earnings call that the higher spending reflects an accelerated rollout of computing capacity.
Google also plans to lean more heavily on third-party cloud providers while it builds out its own infrastructure, a strategy Ashkenazi said will create "modest margin pressure in the near term" but help the company "keep growing our customer base and capture greater overall value."
Google Cloud is becoming the company's AI growth engine #
Search remains Google's largest business, but Cloud is increasingly emerging as its primary AI growth engine.
Over Q2, Google Cloud once again delivered the strongest performance across Alphabet's businesses. Revenue jumped 82% year over year to $24.8 billion, well ahead of analyst expectations, while cloud backlog reached $514 billion, highlighting continued demand from businesses building AI applications.
"We're still in a supply-constrained environment," Ashkenazi said, adding that Google is seeing "very strong demand both from external cloud customers as well as across the business."
About 60% of Google's infrastructure spending during the quarter went toward AI servers, with the rest invested in data centers and networking equipment.
Google's Gemini app is closing in on ChatGPT #
Google's AI assistant is approaching a milestone, signaling that Google's consumer AI strategy is gaining momentum amid intensifying competition with OpenAI and Anthropic.
The company said during Wednesday's earnings call that the Gemini app now has 950 million monthly active users, up from about 650 million last October and more than 750 million earlier this year. CEO Sundar Pichai also said during the earnings call that daily active users have tripled over the past year.
That puts Gemini within striking distance of OpenAI's ChatGPT, which recently reached roughly 1 billion monthly users.
Google is also trying to make its AI models cheaper to run. This week, it introduced three new Gemini models, including Gemini 3.6 Flash, which the company says improves coding performance while using fewer tokens, reducing the cost of deploying AI applications.