Alphabet CEO Sundar Pichai (pictured) rejected concerns Google is losing ground in the AI race after delays to the Gemini 3.5 Pro model, as the company posted a strong second quarter on booming demand for AI and cloud services.
Speaking on the company’s Q2 earnings call, Pichai acknowledged Google needed to improve in areas including AI coding, but said it remained “very committed and very confident of being at the frontier”.
The chief faced repeated questions over whether Gemini could keep pace with rivals in the AI race after Google delayed the launch of its next advanced model in June. He said Google is “committed to being at the full parade of frontier,” offering models at multiple price points including its more affordable Flash models.
Pichai argued “the frontier is an incredibly dynamic space, and it’s fiercely moving forward”, stressing “there are many attributes on which we are still at the frontier”.
He pointed to Gemini 3.6 Flash, released this week, explaining it improved by more than 10 points on a coding benchmark over its predecessor while using fewer tokens. He also revealed the company has begun training Gemini 4, describing it as its “most ambitious pre-training run yet”.
Once Gemini 4 lands, he added the company plans on “picking up pace and releasing models almost at a monthly cadence”.
Strong demand
In Q2 2026, Alphabet pinpointed Google Cloud, which continued to benefit from enterprise demand for AI infrastructure and services.
Revenue from the unit soared 82% to $24.8 billion and operating income more than tripled to $8.8 billion. Google Services revenue increased 15% to $94.5 billion, driven by a 17% spike in Search, 15% in Google subscriptions, platforms and devices, and a 13% rise in YouTube advertising.
Total revenue rose 24% year-on-year to $119.8 billion, Alphabet’s 12th consecutive quarter of double-digit growth.
Net income surged 298% to $112.1 billion, as it benefitted from a net gain of $98 billion on equity securities. It did not disclose further information, but the company is known to have a sizeable stake in SpaceX and has investment in Anthropic.
“Our AI investments are redefining what’s possible across every part of our business,” Pichai explained, adding ballooning demand for AI infrastructure and enterprise AI solutions helped drive the results.
The search giant also continued ramping AI investment, expecting to spend between $195 billion and $205 billion in capital expenditure this year, up from its previous forecast of $180 billion to $190 billion.
“We have increased our capacity quite significantly over the past three years. The demand still outpaces that investment,” explained Alphabet CFO Anat Ashkenazi, adding that although “we’re still in a supply constraint environment”, the company is “seeing very strong demand, both from external cloud customers as well as across the business”.
Looking ahead, the company added it expects capex to “increase significantly” in 2027 as AI demand swells.
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