Dive Brief:
- Google plans to increase its capital expenditures to $205 billion for its 2026 fiscal year to deliver compute capacity as demand rises, executives said during the tech company’s Q2 earnings call on Wednesday. The figure increased from original estimates of up to $190 billion and capital expenditures are expected to continue increasing significantly into 2027, CFO Anat Ashkenazi said during the call.
- “We’re still in a supply-constrained environment,” Ashkenazi said. “While we have increased our capacity quite significantly over the past three years, the demand still outpaces that investment.”
- The company’s cloud revenues were up 82% in the second quarter, driven primarily by an increase in Google Cloud Platform revenue across enterprise AI products and infrastructure. Google also began to see revenue from its tensor processing unit systems, which were deployed to customer data centers for the first time during the quarter, Ashkenazi said.
Dive Insight:
Google’s increased capital expenditures continue a trend among tech giants to fund a significant buildout of AI infrastructure to meet heightened enterprise demand for compute capacity.
The overall capacity of U.S. data centers is expected to double over the next three years, according to a report published Thursday by Synergy Research Group. Meanwhile, the operational capacity of hyperscaler-owned data centers will double in the next two years as companies including Google, Microsoft and AWS aggressively invest in buildouts, Synergy found.
“It is indisputable that constrained availability of power and rising local concerns over data centers are crimping many new plans for data centers,” John Dinsdale, a chief analyst at Synergy Research Group, said in the report. “But it is also clear that data center developers will continue to find ways around those issues and that booming demand will continue to drive aggressive capacity growth.”
AI developments such as agents consume large amounts of compute power, contributing further to supply constraints as enterprises seek to deploy the technology at scale. Agentic AI in particular places additional strain on legacy IT systems to support the compute-hungry technology.
Greater AI use is also translating to more token consumption, which is starting to become a cost concern for enterprises. Tokens are often used as a measure for AI use and have become a method for providers to price services.
Businesses are using AI — and thus, tokens — in multiple ways across workflows, such as to streamline data analysis, manage relationships with customers, build agents, automate processes and improve cybersecurity, Google CEO Sundar Pichai said during the Wednesday earnings call.
“All of this momentum is driving growth in our paid token usage,” Pichai said.
More than 2,000 enterprises consumed over 100 billion tokens in the last year, while nearly 500 Google Cloud customers processed over 1 trillion tokens, Pichai said.
While reporting increased capital expenditures and revenues this week, Google was also on the receiving end of a steep fine from the European Commission on Thursday for non-compliance with the Digital Markets Act. The commission fined Google 890 million euros ($1.01 billion) for self-preferencing its services on Google Search and restricting businesses from directing consumers to cheaper alternatives.
“The best products should succeed because they’re better, not because they’re owned by the company running the search engine,” Teresa Ribera, EVP for clean, just and competitive transition at the commission, said in a press release.
