Google reshuffles AI leadership as cloud growth outpaces rivals

Alphabet ↘ 0.88% delivered a second-quarter earnings beat on July 22 that reinforced its position at the center of the AI infrastructure boom, posting revenue of $119.8 billion — up 24% year over year — while raising its full-year capital expenditure guidance to as much as $205 billion. The results, arriving weeks before a leadership reshuffle rattled shares, drew sharp contrasts with Meta Platforms ↗ 0.37%, whose own spending trajectory and weak guidance sent its stock tumbling.abc+1

Cloud Growth and the TPU Gambit

Google Cloud was the standout, with revenue surging 82% to $24.8 billion and operating income nearly tripling to $8.8 billion. CEO Sundar Pichai pointed to a cloud backlog that grew more than $50 billion in the quarter to reach $514 billion, driven by demand for Alphabet's Gemini models and its custom Tensor Processing Units.inkl+1

For the first time, Alphabet recorded revenue from selling TPUs to outside customers, a move that places the company in direct competition with Nvidia ↗ 2.27% while bolstering its long-term chip design partner Broadcom ↗ 1.71%. Broadcom's deal with Alphabet to develop and supply future TPU generations runs through at least 2031.currently.att.yahoo+1

Meta's Spending Contrast

Where Alphabet's results were met with optimism, Meta's Q2 report on July 29 offered a cautionary counterpoint. Meta posted $60.8 billion in revenue, up 28%, but free cash flow cratered to $784 million from $8.55 billion a year earlier as capital spending hit $31 billion in a single quarter. The company narrowed its full-year capex forecast to $130-$145 billion and raised the floor of its total expense outlook to $165-$169 billion, reflecting legal charges and rising infrastructure costs. Shares fell sharply after the report, according to CNBC.finance.yahoo+3

What It Means for the AI Supply Chain

Alphabet's capex raise to $195-$205 billion — up from $180-$190 billion just a quarter earlier — signals sustained demand flowing to chipmakers and server suppliers. The decision to begin monetizing TPUs externally adds a new revenue stream while intensifying the competitive dynamics between custom silicon and Nvidia's GPUs. Analysts at Mizuho have estimated Broadcom could record $21 billion in AI revenue attributable to its work with Alphabet in 2026 alone.oplexa+1

Wall Street remains bullish on Alphabet, with 47 of 54 covering analysts rating the stock a "Strong Buy" and a consensus price target implying roughly 21% upside.inkl