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Dive brief:
- Google plans to increase its capital expenditures to $205 billion for its fiscal year 2026 to Provide compute capacity as demand increases, executives said during the tech company Announcement of results for the second quarter on Wednesday. The figure increased from original estimates of up to $190 billion and capital expenditures are expected to continue to increase significantly in 2027, CFO Anat Ashkenazi he said during the call.
- “We’re still in a supply-constrained environment,” Ashkenazi he said “Although we’ve increased our capacity quite significantly over the last three years, demand still outstrips that investment.”
- The company’s cloud revenue increased 82% a the second quarter, driven primarily by a increase in Google Cloud Platform revenue through enterprise AI products and infrastructure. Google also started seeing revenue from its Tensor Processing Unit systems, which were deployed in customer data centers for the first time during the quarter.Ashkenazi he said
Diving knowledge:
Google’s increased capital spending follows a trend among tech giants to finance a significant build-out of AI infrastructure to meet increasing business demand for computing capacity.
The overall US data center capacity is expected to double about him the next three years, according to a report published TThursday by Synergy Research Group. Meanwhile, the operational capacity of data centers owned by hyperscalers will double in the next two years as companies like Google, Microsoft and AWS Aggressively invest in constructions, found Synergy.
“It is undisputed that limited power availability and growing local concerns about data centers are limiting many new plans for data centers.” John Dinsdale, chief analyst at Synergy Research Grouphe said in the report. “But it’s also clear that data center developers will continue to find ways around these issues and that booming demand will continue to drive aggressive capacity growth.”
AI developments such as agents they consume large amounts of computing powerfurther contributing to supply constraints as companies look to deploy the technology at scale. Agent artificial intelligence, in particular, places additional strain on legacy IT systems to support compute-hungry technology.
Greater use of AI is also being translated more token consumptionwhich is starting to be a cost concern for companies. Tokens are often used as a measure for AI usage and have become a method for providers to price services.
Businesses use AI (and therefore tokens) in multiple ways in their workflows, including to streamline data analysis, manage customer relationships, create agents, automate processes, and improve cybersecurity. Sundar Pichai, CEO of Google said during the Wednesday earnings call
“All of this momentum is driving the growth of our use of payment tokens,” Pichai said.
More than 2,000 companies consumed more than 100 billion tokens in the past year, while nearly 500 Google Cloud customers processed more than 1 trillion tokens, Pichai said.
While this week it reported an increase in capital spending and revenue, Google was also at the end of a steep European Commission fine activated Thursday for breach of the Digital Markets Act. The commission fined Google 890 million euros ($1.01 trillion) to auto-prefer their services on Google Search and restrict companies from directing consumers to cheaper alternatives.
“The best products should succeed because they’re better, not because they’re owned by the company that runs the search engine.” Teresa Ribera, vice president of clean, fair and competitive transition in the commissionhe said in a press release.
