Alphabet Boosts AI Spending to $85 Billion, Beats Q2 Earnings Expectations

Alphabet, the parent company of Google, has reported Q2 earnings that beat expectations, with a revenue of $81.7 billion and a 16% increase in research and development spending. However, the company plans to invest $85 billion in AI by 2025, a 10 billion dollar increase from previous plans. The competition in the AI market is fierce, with companies like Microsoft, OpenAI, and Meta investing heavily in the technology. Alphabet's focus on AI is driven by the potential for new chatbots to surpass traditional search engines.

Title: Alphabet's Q2 Earnings Beat Expectations, AI Investments Surge

Alphabet Inc., the parent company of Google, reported its Q2 2025 earnings, which exceeded market expectations. The company's revenue for the quarter reached $81.7 billion, marking a 16% increase in research and development spending. Alphabet's CEO highlighted the company's robust growth across various segments, driven by its differentiated, full-stack approach to AI [1].

Key Highlights

# Search
Google Search delivered double-digit revenue growth, with new features like AI Mode and AI Overviews performing exceptionally well. AI Mode, which is rolling out in the U.S. and India, has already garnered over 100 million monthly active users. The AI Overviews feature, now powered by the Gemini 2.5 model, has seen a significant increase in global query growth, contributing to the overall search momentum [1].

# YouTube
YouTube continues to lead U.S. streaming watch time, with Shorts averaging over 200 billion daily views. The platform's AI-driven features, such as Auto Dubbing, are helping creators reach broader audiences. Additionally, YouTube expanded its Premium Lite offerings to 15 new countries, reflecting the platform's growing subscription base [1].

# Cloud
Google Cloud experienced strong growth in revenues, backlog, and profitability. The company's annual revenue run-rate is now over $50 billion, driven by significant demand for its comprehensive AI product portfolio. Google Cloud's AI infrastructure, which includes industry-leading TPUs and GPUs, is crucial in meeting the growing demand from customers [1].

# AI Investments
Alphabet plans to invest $85 billion in AI by 2025, a $10 billion increase from previous plans. This investment is aimed at driving innovation in AI technologies, including chatbots that could potentially surpass traditional search engines. The company's focus on AI is part of a broader strategy to stay competitive in a highly dynamic market [1].

Competitive Landscape

The AI market is highly competitive, with companies like Microsoft, OpenAI, and Meta investing heavily in the technology. Alphabet's focus on AI is driven by the potential for new chatbots to revolutionize search engines and other digital services. By investing in AI, Alphabet aims to maintain its leadership position in the tech industry [1].

Conclusion

Alphabet's Q2 earnings report underscores the company's strong performance across its core businesses and its commitment to AI. The company's robust growth in search, YouTube, and Cloud segments, coupled with its significant AI investments, positions Alphabet well to navigate the competitive AI landscape. Investors and financial professionals should closely monitor Alphabet's ongoing AI initiatives and their potential impact on the company's future growth prospects.

References

[1] https://blog.google/inside-google/message-ceo/alphabet-earnings-q2-2025/