Google’s advertising engine posted another quarter of double-digit growth, with revenue climbing 14 percent year over year to $81.6 billion and total sales rising 24 percent to $119.8 billion, beating expectations. The beat was broad: search and other revenues jumped nearly 17 percent to $63.3 billion, while YouTube ads grew roughly 13 percent to $11 billion. Yet the stock traded lower Thursday morning, because the number that mattered to investors was not revenue but the $195 billion to $205 billion the company now plans to spend on capital expenditures this year, up from a prior range of $180 billion to $190 billion, with a promise that spending will “increase significantly in 2027.”
The bull case rests on Gemini, the AI model executives say is making search more relevant and ads more valuable. Emarketer principal analyst Nate Elliott argued the results back Google’s claim that AI is additive to search, not a replacement. Chief Business Officer Philipp Schindler put it more plainly on the earnings call: Gemini supercharges the ability to understand what people are looking for and match the right ads. That precision also lifted commerce-enabled shopping campaigns, which saw a 20 percent improvement in delivering highly relevant ads thanks to AI.
YouTube provided its own tailwind. Over 1.7 billion unique global viewers watched World Cup-related content during the tournament, and Google used the event to roll out custom sponsorships that dynamically surface videos tailored to a brand’s desired moment. The platform is also betting that connected TV will become a checkout aisle: at its Brandcast presentation this spring it showed integrations letting viewers complete a purchase on their TV in two clicks. Schindler said shoppable ad formats in the living room will see a lot of innovation and direct response.
The problem is the price tag. Google is spending roughly $200 billion this year to build the infrastructure that makes those incremental ad improvements possible. That figure dwarfs the $81.6 billion in ad revenue the business just generated in a single quarter, and the CFO, Anat Ashkenazi, reiterated that the spend curve steepens next year. Investors are now asking the same question across the sector: when do resource-intensive AI investments stop being a drag and start being a return?
Meta and Amazon will face that scrutiny when they report. For now, Google has proven AI can juice the core ads machine, search up 17 percent, YouTube up 13 percent, shopping relevance up 20 percent, but it has also proven that juicing it costs a fortune. The market’s reaction Thursday suggests it is no longer willing to take that trade on faith.