Google AI spending set to double as search revenue slows

Google is expected to report $45.1 billion in capital spending for the quarter—a 101% increase from the $22.4 billion spent a year earlier—as it ramps up AI‑related infrastructure while search revenue growth slows to 17% year‑over‑year [1].

Capital spending surge

Analysts surveyed by FactSet project Alphabet’s quarterly capex at $45.1 billion, more than double the $22.4 billion recorded in the same period last year [1]. The surge reflects the company’s push to build the compute and storage capacity needed for its expanding AI services, from large‑language‑model offerings to generative‑AI tools embedded across Google Cloud. This level of spending would dwarf the $117.1 billion revenue forecast for the quarter, underscoring that a sizable share of cash flow is being redirected toward future‑growth infrastructure.

Search revenue under pressure

While overall advertising is expected to rise 14% to $81.3 billion, search revenue—traditionally Alphabet’s cash cow—is forecast to grow 17% to $63.4 billion [1]. The modest pace, relative to historic double‑digit growth, signals early cracks in the search business as advertisers shift budgets toward AI‑enabled placements and competitors like Microsoft and Amazon expand their own search‑plus‑AI ecosystems. The earnings release will therefore be a litmus test for whether AI‑driven cloud revenue can offset any slowdown in core search earnings.

Competitive context

Google’s AI spend pits it against rivals such as Microsoft, which is also scaling its Azure AI infrastructure, and Nvidia, whose H200 chips are being cleared for Chinese customers despite export restrictions [1]. The magnitude of Alphabet’s capex suggests a commitment to retain leadership in AI compute, a market where speed and scale are critical. If Google Cloud can translate the new capacity into higher margins, it may validate the heavy investment despite the softer search outlook.

What to watch

• Q2 earnings release – Alphabet’s actual capex figure and guidance for 2027 will confirm whether the spending surge is on track.
• Google Cloud AI revenue – Quarterly growth in AI‑related cloud services will indicate if the infrastructure spend is paying off.
• Search market share – Any further erosion of Google’s share to Microsoft’s Bing or emerging AI‑first search platforms will be a key barometer of the business shift.

The impending earnings will reveal whether Alphabet’s bet on AI infrastructure can sustain its advertising engine as search revenue growth eases, and whether the company can outpace rivals in turning massive capex into profitable AI services.