The search giant now expects to spend between US$195 billion and US$205 billion in capital expenditures, its finance chief Anat Ashkenazi said on a conference call with analysts.
The company said last quarter that it planned to spend between US$180 billion and US$190 billion this year.
Shares of the company were down about 3 percent in extended trading.
The stock was initially volatile but mostly flat, but dipped after Ashkenazi announced the capex update.
“We have increased our capacity quite significantly over the past three years. The demand still outpaces that investment,” Ashkenazi said in justifying the increased spending plans. She added that faster-than-expected delivery of capacity contributed to the hike.
Revenue at Google Cloud rose 82 percent to US$24.8 billion during the quarter ended June, driven by strong demand from AI-hungry enterprises worldwide. Analysts on average expected a 64% increase, according to data compiled by LSEG.
Advertising revenue came in at US$81.6 billion compared to estimates of US$81.1 billion.
Total revenue for the quarter was US$119.8 billion, beating the consensus estimate of US$116.9 billion. But, adjusted profit per share of US$2.85 fell slightly short of Wall Street projections of US$2.89. And the company reported negative free cash flow for the first time in its history, burning US$5.9 billion this quarter.
“After a negative cash flow quarter, the new raise in capex does not sit well for Alphabet,” said Thomas Monteiro, senior analyst at Investing.com.
“The market’s most reliable cash generators are now spending more than they bring in. As long as revenue keeps accelerating, investors will tolerate it. But capital has a real cost again, and the room for error is shrinking every quarter.”
While Google Cloud has made Alphabet a big beneficiary of the AI boom, the company’s own AI efforts have lost some steam this year after it delayed the June launch of its next flagship model, Gemini 3.5 Pro.
That has left Google trailing in the AI coding tools market and fuelled concerns on Wall Street, especially as Anthropic and OpenAI have consistently rolled out enterprise-focused upgrades, and Chinese open-source models have also gained strong traction.
During the question-and-answer portion of the earnings call, multiple analysts pressed CEO Sundar Pichai for clarity around whether Google could keep with its rivals at the frontier of model development.
“There are many attributes on which we are still at the frontier. There are areas where we’ve acknowledged we need to improve; coding and agentic coding is an example of that,” Pichai said on the call.
Pichai said that while Google continued to test Gemini 3.5 Pro, it had also started training Gemini 4 and was “applying a lot of our compute and effort in that direction” in order to remain competitive.
“We are both very committed and very confident of being at the frontier for the next generation,” he said. (Reuters)
