Alphabet, Google's parent company, set its annual capital expenditure this year at $195 billion to $205 billion (about 288 trillion to 303 trillion won) to meet surging demand for artificial intelligence (AI). That is $15 billion higher than the previous $180 billion to $190 billion.
Chief Financial Officer Anat Ashkenazi said on a conference call after the earnings release on the 22nd (local time), "We are rapidly expanding our infrastructure supply capacity, including data centers and computing capacity, to respond to increasing AI demand," and "Despite significantly expanding facilities over the past three years, supply still has not caught up with demand."
Ashkenazi said, "AI demand is very strong not only from external cloud customers but also within the company," and noted that the company will continue investing in AI infrastructure as long as investment profitability holds. She also projected that related investment in 2027 will be "significantly larger than this year."
Alphabet's stock price fell about 5% in after-hours trading after Ashkenazi, the CFO, released plans to expand capital expenditure. Although the company posted second-quarter results that topped market expectations, the decline is seen as reflecting market concerns that expenditure is rising sharply relative to AI business performance and revenue.
Thomas Monteiro, senior analyst at Investing.com, told Reuters, "With cash flow having turned negative, further expansion of capital expenditure could be a burden for Alphabet," adding, "The market's representative cash-generating corporations are now spending more than they earn."
Alphabet said its second-quarter revenue this year rose 24% from a year earlier to $119.8 billion (about 177 trillion won), powered by growth in its cloud business. Operating profit increased 30% from a year ago to $40.77 billion (about 60 trillion won), and net profit surged 298% to $112.1 billion (about 165 trillion won).