Alphabet's finance chief Anat Ashkenazi told analysts on Wednesday that the company still doesn't have enough computing capacity to serve its cloud customers or its own product teams. Her fix for Q3: lease infrastructure from third parties while Google keeps building its own data centers. It will help onboard customers, she said, but margins will feel it in the short term.
That admission came alongside numbers that made it hard to argue against the spending. Google Cloud revenue jumped 82% year over year to $24.8 billion in the fiscal second quarter, well ahead of the $22.46 billion Wall Street had penciled in. Three months ago the same unit grew 63% to $20 billion, so the acceleration is real. The segment's unbilled contract backlog now stands at $514 billion, driven by companies buying AI infrastructure and enterprise tools.
Alphabet's broader results
Total revenue came in at $119.8 billion, up 24% and above the $116.93 billion LSEG-tracked analysts had expected. That marks 12 consecutive quarters of double-digit growth. Earnings per share hit $9.11 against a forecast of $2.89, though roughly $98 billion of other income, mostly paper gains on Alphabet's stakes in other companies, inflated that figure significantly.
Capital expenditures for the quarter reached $44.9 billion. About 60% of that went to servers, with the remainder split between data centers and networking. For the full year, Alphabet now projects capex of $180 billion to $190 billion. Investors have spent months questioning whether the AI buildout will ever pay off. Wednesday's cloud number was Alphabet's sharpest answer yet.
Some of the largest cloud customers require unusually heavy compute loads, which is part of why capacity keeps running short even as spending climbs.
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