Cheaper and faster models coming from developers in China — particularly from DeepSeek and Moonshot — have ruffled feathers, and raised concerns about intellectual property theft, in the US.
Google’s cloud business grew by more than 80 percent, the company said on Wednesday, which exceeded investor expectations who are looking for signs that the company’s AI investments are paying off.
CEO Sundar Pichai said in a statement that the successful quarter was due in part to growth of its AI model Gemini and AI search queries, as well as YouTube where more than 1.7 billion unique viewers tuned in to videos related to the 2026 FIFA World Cup.
“Our AI investments are redefining what’s possible across every part of our business,” Pichai said.
The company recorded more than $119 billion in total revenue between April and June, up 24 percent compared to the same period last year.
Its cloud business recorded more than $24 billion in the quarter, and its net profit tripled to over $112 billion.
And its Gemini app has grown to 950 million monthly active users.
That puts its AI chat app within striking distance of OpenAI’s ChatGPT which hit 1 billion monthly active users in June, according to reports.
Alphabet spent nearly $45 billion in the quarter, “the vast majority” of which went towards AI investments, CFO Anat Ashkenazi said during a call with analysts.
The company also increased its capital expenditure estimate for the full year to as much as $205 billion, a jump from $190 billion last quarter.
The increase is “primarily due to an acceleration in the delivery of capacity to meet growing demand,” Ashkenazi continued. “We continue to expect our capex to increase significantly in 2027, and will provide more details at a later date.”
The company’s stock fluctuated after hours and dropped by more than 4 percent.
AI race
Major tech companies in the US have been spending billions to build out AI infrastructure and develop increasingly more advanced AI models.
In June, Google parent company Alphabet announced it would raise up to $80 billion in stock to fund its AI efforts, with Warren Buffett’s Berkshire Hathaway committing $10 billion.
The spending is part of a larger race across the tech sector to stay competitive amid soaring demand for computing power.
Amazon, Microsoft, Alphabet and Meta are collectively on track to pour roughly $700 billion into AI data centers, chips and computing infrastructure this year.
Amidst competition for customers, AI developers are also designing lower-cost versions of their own models.
On Tuesday, Google launched three new models under the name “Flash” which the company described as cheaper, faster and more reliable.
Cheaper and faster models coming from developers in China — particularly from DeepSeek and Moonshot — have ruffled feathers, and raised concerns about intellectual property theft, in the US.
This week, White House technology official Michael Kratsios accused Moonshot of creating its new Kimi K3 model off of Anthropic’s powerful new model known as Fable.
Distillation is a technique in which a smaller AI model is trained to mimic the outputs of a larger, more capable one.
