Google parent Alphabet is leveraging Google's artificial intelligence prowess in models, chips, agents and data security to grow its cloud computing business, the chief executive of its cloud business, Thomas Kurian, said at an industry technology conference on Tuesday. Google stock climbed.
"We've spent years building advanced AI technology of our own — chips, systems, tools, agents — we made those bets very early," Kurian said at Goldman Sachs' Communacopia conference. "Much of the work that you see today has been underway for many, many years. We're not just reselling third-party AI technology. So why we're winning is because we see this deep product differentiation now being adopted by customers and (broadening) our addressable market. In turn, that's leading us to grow revenue and operating income."
Further, Google reported second-quarter cloud computing revenue of $13.62 billion, up 32% from a year earlier, vs. estimates of $13.14 billion. Artificial intelligence-related workloads — training AI models and processing AI apps — were a big driver of cloud revenues.
Google Cloud Profitability
At Communacopia, Kurian said the shift to artificial intelligence is still in the early stages.
"We're seeing growth from net new customers. We're seeing deeper relationships with existing customers. And, we're broadening our addressable market. As a result of that, we're seeing growth in revenue, our remaining performance obligations, or backlog, and operating margin," he said.
Kurian added that the cloud computing business now has a order backlog of $106 billion. "More than 50% of it will convert to revenue over the next two years," he said.
AI Growing In Enterprise Market
Kurian noted that Google has developed AI Gemini models targeting specific industries, such as financial services and pharmaceutical.
"We see demand from four customer segments. Nine of the 10 leading AI labs in the world are our customers. We see demand from traditional enterprises that are deploying AI models. We're seeing demand in capital markets that are shifting from using classical computation to using (AI) inference. And, we're seeing interest in high performance computing applications."
"(In enterprise) some companies are using it to build digital products, others are using it to transform customer service," he added. "Others are using it to streamline the core of the company and their back office. And, we've seen lot of organizations using it in their IT departments to write code and to improve the quality of code that's being written."
Under Kurian, Google Cloud's profitability has improved. In the second quarter, Google Cloud's operating profit increased by 141% year over year to $2.83 billion.
Meanwhile, Google said it expects capital spending to reach $85 billion in 2025, up 62%. Much of the capital spending will go to computer servers and other AI-related infrastructure.
Kurian, a former top executive at Oracle, took over as the cloud-computing unit's CEO in November 2018. His biggest challenge has been gaining share against the two biggest cloud computing services providers, Amazon.com and Microsoft.
When Kurian arrived, Google's cloud customers were mostly other tech companies. Under Kurian, Google has targeted enterprise customers with cloud-based data-analytics and artificial intelligence tools.
More recently, Google's cloud business is getting a boost from AI-related computing deals from OpenAI and Meta Platforms. With many companies looking for alternatives to Nvidia AI chips, Google Cloud sees an opening to sell more of its internally developed AI accelerators, called TPUs.
Google Stock Technical Ratings
On Tuesday, Google stock rose 2.4% to close at 239.63. Meanwhile, Google stock has gained 26% in 2025 after underperforming in the first half of the year.
In a move that could boost the cloud computing business, Alphabet in March agreed to purchase fast growing, privately held cybersecurity firm Wiz in an all-cash, $32 billion deal,
Meanwhile, Google stock holds a Composite Rating of 98 out of 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Google stock has an Accumulation/Distribution Rating of A-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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