Google‘s cloud chief Thomas Kurian said the company’s existing customers are shelling out “roughly 50% more” than they’ve already committed to spend on its products, which helped drive its red-hot cloud growth during the second quarter.
“Our existing customers have increased their spend when they make a commitment to us,” Kurian told CNBC’s Jim Cramer on Thursday. “They’re spending roughly 50% more than the commitment, and so it comes down to the differentiation in our product portfolio, the strength we have in our go-to-market execution, and you see that in both top line and operating income growth.”
Kurian’s comments come after Google parent Alphabet posted better-than-expected revenue for the second quarter on Wednesday, helped by growth of 82% year-on-year in its cloud business.
Demand for its cloud services is strong enough that the company plans to call on third-party providers to fill in extra capacity. That drove shares of neocloud providers CoreWeave and Nebius higher.
Kurian said the move is necessary, even though it will hurt margins, because it allows Google to capture that demand and those customers tend to spend more on its other services.
“So for us, when we look at the short term, we’re going to rent some capacity for you know a few quarters,” Kurian said. “It allows us to bring customers in, bridge them over to when we have sufficient capacity available, and then that will compound over time, and the return on investment makes sense for us.”
Alphabet shares plunged 7.1% on Thursday after the company boosted its capital spending forecast to as much as $205 billion this year, worrying investors who are jittery about ballooning artificial intelligence budgets.
The company said it now expects to spend between $195 billion and $205 billion in 2026, up from the $180 billion to $190 billion forecast provided last quarter. Its capex reached $44.9 billion during the second quarter, with most of the spending going toward AI infrastructure.
Tech companies are burning through cash to bankroll spending on AI infrastructure, while trying to reassure Wall Street that those investments will yield returns.
Before Alphabet’s second-quarter report, tech’s megacaps were expected to spend roughly $725 billion this year on AI initiatives. That total will likely rise as more of Alphabet’s peers post quarterly earnings in the coming days. Amazon, Microsoft and Meta will all report results next week.
Kurian defended the company’s “very, very disciplined” capex spending and said companies are seeing real returns on utilizing Google’s AI solutions.
“Macy’s, for example, has found as they deployed our AI system, it’s improved the size of the shopping basket that they see,” he said. “We’ve seen Macquarie Bank save a lot of processing time by automating many of the workflows in their organization.”
