Alphabet shares jump 3% as AI-driven spending fuels cloud revenue surge

Time of India

2 days ago

Alphabet
shares rose more than 3% in early trading on Thursday as the
Google
parent's earnings underscored a key message to investors:
AI spending
is climbing, but so are the returns.
The tech giant has raised its 2025
capital
spending forecast by $10 billion to $85 billion and signaled even higher outlay next year, stepping up efforts to meet soaring cloud
demand
and stay competitive in Silicon Valley's escalating AI race.
Explore courses from Top Institutes in
Please select course:
Select a Course Category
Digital Marketing
PGDM
Public Policy
Others
others
Healthcare
Project Management
Artificial Intelligence
MBA
Technology
Product Management
Cybersecurity
Management
Degree
healthcare
Finance
Operations Management
Data Analytics
Design Thinking
Data Science
CXO
MCA
Leadership
Data Science
Skills you'll gain:
Digital Marketing Strategy
Search Engine Optimization (SEO) & Content Marketing
Social Media Marketing & Advertising
Data Analytics & Measurement
Duration:
24 Weeks
Indian School of Business
Professional Certificate Programme in Digital Marketing
Starts on
Jun 26, 2024
Get Details
Skills you'll gain:
Digital Marketing Strategies
Customer Journey Mapping
Paid Advertising Campaign Management
Emerging Technologies in Digital Marketing
Duration:
12 Weeks
Indian School of Business
Digital Marketing and Analytics
Starts on
May 14, 2024
Get Details
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
Play War Thunder now for free
War Thunder
Play Now
Undo
Its cloud-computing unit delivered an almost 32% jump in second-quarter revenue, surpassing expectations, as investments in in-house chips and the
Gemini AI
model began to pay off.
The results bode well for rivals Microsoft and Amazon.com, both of which have been stepping up data center investments and operate larger cloud businesses.
"Google came back fighting this quarter," said Bernstein analyst Mark Shmulik. "Investors have long been clamoring for Google to get more 'aggressive' in the AI race," he added.
Live Events
An early AI pioneer with its invention of the Transformer model - the foundation of most modern generative AI - Google appeared to fall behind OpenAI and Microsoft last year.
But it has rebounded this year, with AI Mode reaching 100 million monthly users just two months into its wider rollout, and Gemini surpassing 450 million monthly users.
Its ad business, which accounts for about three-quarters of its sales, also continues to fare well in the face of economic uncertainty wrought by tariffs and geopolitical tensions.
Revenue in the business rose a better-than-expected 10.4%, a positive sign for rivals such as Meta and Snap that rely on digital ads for most of their revenue.
At least 27 brokerages raised their price targets on Google stock after the results, taking the median target to $220 from $200 a month earlier.
Still, some analysts warned the higher spending may draw fresh scrutiny from investors, who have largely stayed on the sidelines this year. Alphabet shares are up just 0.5% in 2025, trailing Microsoft's 20% increase and a 22% rise in Meta stock, also held back by regulatory battles that are looking to break its illegal
monopoly
in the search and the ad-tech markets.
Alphabet's 12-month forward price-to-earnings ratio stands at 18.88, trailing Microsoft's 33.03 and Amazon's 33.31, according to data compiled by LSEG.
"On paper, it has all the right tools to lead in AI - cutting-edge models and massive distribution," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
"That said, until there's more confidence AI integration won't cannibalise core search revenue, and some clarity around ongoing legal battles, there's enough uncertainty to cap near-term upside."