Google Cloud CEO says existing customers spend 50% more than committed contracts as segment grows 82%. Alphabet raised 2026 capex forecast to $205B, sending shares down 7%.
Google Cloud chief Thomas Kurian said existing customers are spending "roughly 50% more" than their committed contracts, fueling the segment's 82% year-over-year growth in the second quarter. The comments came a day after parent Alphabet posted revenue that beat analyst estimates, driven largely by cloud demand.
"Our existing customers have increased their spend when they make a commitment to us," Kurian told CNBC on Thursday. "They're spending roughly 50% more than the commitment."
The cloud business is growing fast enough that Alphabet plans to rent extra capacity from third-party providers, including neocloud firms CoreWeave and Nebius. Kurian acknowledged the move will hurt near-term margins but said it lets Google capture demand that tends to lead to higher spending on other services.
"So for us, when we look at the short term, we're going to rent some capacity for a few quarters," Kurian said. "It allows us to bring customers in, bridge them over to when we have sufficient capacity available."
Alphabet shares fell more than 7% on Thursday even after the earnings beat. The company raised its 2026 capital spending forecast to as much as $205 billion, up from the $180 billion to $190 billion range it gave last quarter. Capex reached $44.9 billion in the second quarter, most of it going to AI infrastructure.
Tech companies are pouring cash into AI spending while trying to convince investors the investments will pay off. Before Alphabet's report, megacaps were expected to spend roughly $725 billion on AI this year. Amazon, Microsoft and Meta report results next week.
Kurian defended Alphabet's "very, very disciplined" capex approach and pointed to customer results. "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."
Alphabet's stock market analysis shows the stock at $378.69, down 2.99% today, with an Alpha Score of 61 out of 100.
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