Earlier this year, Alphabet sent Wall Street into a panic when it unveiled plans to spend a staggering $75 billion on A.I. investments in 2025. Now, the Big Tech player is taking its spending spree one step further as it prepares to invest an additional $10 billion throughout the year, bringing its total predicted capital expenditures to $85 billion. These funds will not only flesh out the Google parent company’s A.I. infrastructure needs and meet a surge in customer demand for its products, but help fund the demand for new talent amid an all-out hiring war brewing in Silicon Valley.
“It’s exciting to see the traction,” said Sundar Pichai, CEO of Alphabet and Google, of his company’s A.I. efforts during its second-quarter earnings call on Wednesday (July 23). “We’ll continue investing in the people, talent and compute needed to make sure that we are set up for the opportunity ahead.”
Alphabet reported revenues of $96.4 billion for the April-June quarter, surpassing analyst expectations and representing a 14 percent year-over-year increase. The bulk of this figure came from its Google Services division, which includes Google’s search business and totaled $82.5 billion worth of sales during the quarter. Revenue also jumped across its Google Cloud and Other Bets departments. The tech behemoth’s quarterly profit, too, exceeded Wall Street’s predictions and climbed to $28.1 billion compared to $23.6 billion last year.
Progress was also recorded across the A.I. front, with Alphabet’s Gemini A.I. model and AI Overviews search tool continuing to grow in popularity. The Gemini app now has more than 450 million monthly active users, while Alphabet’s A.I.-generated search summaries are used by more than 2 billion monthly customers and have become especially well-received by younger viewers, said Pichai.
That growth doesn’t come without a cost. Alphabet’s capital expenditures for the second quarter came in at $22.4 million compared to the $17.2 billion it spent between January and April. Its ballooning investments are expected to carry on into next year. “Looking out to 2026, we expect a further increase in capex due to the demand we’re seeing from customers as well as growth opportunities across the company,” Anat Ashkenazi, Alphabet’s chief financial officer, told analysts.
Some of those customers include Mattel, the toymaker behind Barbie, which is using Alphabet’s A.I. features to review and act on product feedback, said Pichai. Other clients, such as Target, have tapped Gemini to improve cybersecurity services, while Wayfair is personalizing customer experience with the help of Alphabet’s A.I.-integrated databases.
Alphabet isn’t the only Big Tech player ready to open its wallet amid the ongoing A.I. revolution. Microsoft is expected to invest some $80 billion in the new technology in 2025, while Amazon will spend around $100 billion, and Meta’s costs could reach as high as $72 billion.
For some of the leading A.I. developers, heightened investments will include attempts to reinvent the wheel when it comes to how customers will interact with A.I. going forward. Meta, for example, is currently focused on pushing its Ray-Ban smart glasses. Over at OpenAI, the ChatGPT developer has tapped Jony Ive to develop an entirely new line of devices tailored for the emerging technology.
Earlier this year, Alphabet announced a $75 million investment in Warby Parker to fund the development of smart glasses, a partnership that Warby Parker co-founder Neil Blumenthal evangelized for the potential to “enhance our everyday lives.” Blumenthal noted the parallels between eyewear and technology, which “are core parts of our identity and daily experience.” Google and Warby Parker “share a commitment to leverage design, utility, and innovation to build products to help customers in every aspect of life,” Blumenthal said. Despite Pichai’s shared excitement over such “emerging categories” in A.I. devices, Pichai warned analysts that he believes phones will remain “at the center of the experience for the next two to three years, at least.”
Besides competing on the device front, Big Tech’s leaders are also currently embroiled in an aggressive talent war that recently saw Meta poach a trove of researchers from rivals Google, OpenAI and Anthropic. Investing in talent will be a component of Alphabet’s A.I. spend, said Ashkenazi, who noted that the company expects an increase in headcount additions throughout the year.
“We’ve gone through these moments before,” said Pichai when asked about Silicon Valley’s A.I. hiring push. Alphabet’s retention and hiring metrics remain healthy for the time being, he said. “I do know individual cases can make headlines, but when we look at numbers deeply I think we are doing very well.”
