$10 billion that spooked Wall Street and investors in a quarter that Google CEO Sundar Pichai has called 'Standout'

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Alphabet exceeded expectations in the second quarter, driven by strong growth in Google’s core search business and Google Cloud. Despite the positive results, investors initially reacted negatively to the announcement of increased capital expenditures, particularly a $10 billion boost for 2025.

Google’s parent company Alphabet beat analysts’ estimates in the second-quarter, posting strong results. The quarter was strong almost across the board for Alphabet. In a statement, the company said that sales climbed to $81.7 billion, topping analysts’ projections of $79.6 billion on average, according to data compiled by Bloomberg. Google saw strong growth in its core search business, which was up over 11% year-over-year, fueled in part by the strong performance of its AI overviews, CEO Sundar Pichai said in a statement. “We had a standout quarter, with robust growth across the company,” Pichai said. “We are leading at the frontier of AI and shipping at an incredible pace,” he added.Alphabet also reported strong growth for Google Cloud, which recently signed on OpenAI as a customer and grew by a third to over $13 billion in revenue for Q2.But there was a number in the earnings call that spooked the market and pulled Google stock down. The stock bounced back later after CEO Sundar Pichai explained the numbers. So, what it is that scared Google investors as well as Wall Street. Investors were reportedly spooked over Google’s announcement that it would boost capital expenditures by $10 billion this year — bringing its total $85 billion. Alphabet said that 2025 capital expenditures will be $85 billion, or $10 billion greater than an earlier forecast.

Google stock initially sank in after-hours trading post the earnings announcement. It rebounded after Chief Executive Officer Sundar Pichai explained that the investments are necessary. “Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers,” he said on a call following the report. Chief Financial Officer Anat Ashkenazi said capital expenditures will rise yet again next year, without providing details.Here are the key numbers for Alphabet’s second quarter vs analysts’ estimates compiled by Bloomberg and LSEG:* Earnings per share: $2.31 vs $2.17 expected* Revenue: $96.42 billion vs $93.94 billion expected* Google advertising revenue: $71.34 billion vs $69.6 billion expected* YouTube advertising revenue: $9.79 billion vs $9.5 billion expected* Search revenue: $54.19 billion vs $52.7 billion expectedAmong Alphabet’s other Bets, the self-driving car business Waymo, generated $373 million in revenue, missing estimates for $429.1 million. CFO Ashkenazi said that Alphabet will continue devoting more resources to Waymo. Alphabet has been aggressively expanding Waymo operations, which may soon face increased competition as Tesla ramps up its robotaxi business. Talking of Waymo, CEO Pichai said, “The team is testing across more than 10 cities this year, including New York and Philadelphia.” He added, “We hope to serve riders in all 10 in the future.”

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