Google Cloud’s Revenue Is Rocketing—but Costs of AI Expansion Are as Well

Wow.

Google Cloud’s business exploded in the second quarter, with revenue soaring 82%, nearly 20 percentage points faster than for the previous quarter.

Rapid demand for AI services—and in this quarter, the impact of AI chip sales—has lifted Google Cloud’s growth rate by nearly 50 percentage points in the past four quarters. 

But while cloud’s red-hot growth lifted Google’s parent Alphabet to a better than expected 24% top-line expansion in the second quarter, the mounting costs of Google’s AI expansion are becoming more evident.

Alphabet burned cash in the quarter, as capital expenditures of about $45 billion offset $39 billion in cash from operating activities.

Google has been a cash machine almost since its founding, so burning cash is an unusual experience for the company.

Investors showed their distaste by selling Google stock down 4% in after-hours trading.