As Google Cloud posts a big increase for the company’s second quarter, Sundar Pichai, the CEO of parent company Alphabet, has acknowledged the need to address how to partner with agentic artificial intelligence (AI) providers.
The public cloud business posted revenue of $13.6bn for the quarter ending 30 June, an increase of $3.3bn compared with the same quarter in 2024.
“AI is positively impacting every part of the business, driving strong momentum,” said Pichai.
According to a transcript of the company’s earning call, posted on Motley Fool, he claimed the capital expenditure (CapEx) being spent on building out Google’s cloud, AI capabilities and other investments has “a healthy ROI”. Specifically, the value delivered to Google’s AI customers, according to Pichai, “is growing significantly”, which he anticipated would help the business. More servers and datacentres are due to come online later this year.
Discussing the investment in cloud infrastructure, Lee Sustar, principal analyst at Forrester, said: “Google Cloud, once a sidelight in Alphabet’s earnings and beset with huge losses, is now standing out as a significant earner, with a 32% jump in earnings compared to the same period a year earlier.
“AI is a big – but far from the only – reason for this gain, as Google Cloud has systematically built out wide enterprise compute capacity beyond its signature data, analytics and AI offerings,” he added.
“Just as notable is that operating margin doubled to about 20%, showing that Google Cloud can grow without burning up all its revenue in vast AI investments, even as Alphabet’s capital expenses surged to a 70% year-on-year growth rate. The era of the AI-native cloud is here, and it shows up in Google Cloud’s numbers.”
Agentic Google search
When asked about the growth of agentic AI, Pichai said: “Just like the early days of the web, there are aspects about it that will expand access and grow the use cases, etc. I think those elements are there.”
But beyond the actual technology, he said: “We have to solve the business models for the varying players involved. There is the value proposition for all the players involved, and I think that’s going to be an equally important thing to create the ‘unlock’ here.”
Through its Project Mariner initiative, the company is beginning to integrate Gemini AI functionality into Google Search to deliver agentic capabilities, which uses natural language to assign AI agents to handle time-consuming tasks.
Robby Stein, vice-president of product for Google Search, explained in a recent YouTube video that such a capability would save people time as it would be able to perform multiple searches on, for instance, a ticket booking site, to determine how best to book seats for a group of people.
Another example is Deep Search, an advanced research tool in Google Search, which the company made available on July 16. Google said Deep Search helps researchers save time by issuing hundreds of searches, and is able to reason across disparate pieces of information to quickly produce what Google calls “a comprehensive, fully-cited report”.
Forrester principal analyst Nikhil Lai said Google appears to be copying rather than outcompeting with rivals such as OpenAI and Perplexity. “Google is spending tremendously to just keep pace with OpenAI and Perplexity, who both launched agents for deep research more than a quarter before Google,” he said.
“Now, the race to the bottom of the funnel is heating up. If Google can get a critical mass of consumers to shop on AI Mode before ChatGPT or Perplexity do, it will retain its place atop the heap of the search engine market.”
