If costs force Google to charge for AI, competitors will cheer | Google | The Guardian
Google just released its latest earnings report, and the results are making waves across Silicon Valley. The tech giant is showing strong growth, especially in its core search business and cloud services. But behind the big numbers is an even bigger investment—one that’s fueling the AI race but costing billions.
Strong Growth in Search and Cloud
Google’s parent company, Alphabet, posted impressive second-quarter results. Revenue jumped 14% compared to last year, with search bringing in 12% more and cloud computing up by a massive 32%. That’s good news for investors who had been worried about the impact of economic slowdowns or global trade issues.
AI Is Driving More Use—Not Less
One key update from Google was about “AI Overviews”—those short, AI-generated answers you now see at the top of some search results. Some feared these would hurt ad revenues by reducing clicks. But the opposite happened: AI Overviews actually led to 10% more search queries, and ad clicks were up 4% compared to last year. That’s a clear sign that AI is helping, not hurting, Google’s business.
But AI Comes with a Hefty Price Tag
To keep up with this AI momentum, Google is spending more than ever. It now plans to invest about $85 billion this year on data centers and related infrastructure. That’s $10 billion more than it originally expected—and nearly four times what it spent back in 2020.
That $85 billion also represents 22% of Google’s projected revenue this year, the highest it’s been since 2006.
Racing to Stay Ahead
Google isn’t alone in this AI arms race. Rivals like Meta (which owns Facebook) and OpenAI (the makers of ChatGPT) are also pouring billions into AI. Meta is ahead in developing AI-powered glasses, and OpenAI is reportedly working on a new gadget with Apple’s former top designer, Jony Ive. In response, Google is teaming up with Warby Parker to explore smart eyewear of its own.
So, Is It All Worth It?
CEO Sundar Pichai says these massive investments are already paying off and making users happy. But when asked exactly how much money these efforts are bringing in, he didn’t give a clear answer. That’s common among tech CEOs right now—they’re all spending big and hoping the payoff comes soon.
Still, Google’s results suggest it’s doing something right. For now, its AI flywheel is spinning—and the money is still flowing.
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