Alphabet‘s capital expenditures in the latest quarter almost doubled, as Google continues to build out data centers for products like its cloud services.
In the second quarter, those costs jumped to $5.48 billion from $2.48 billion a year earlier, Alphabet said in its earnings report after the close of trading on Monday. Analysts on average were expecting capital expenditures of $4.19 billion, according to FactSet.
The spending surge is the latest sign that Google’s cloud division, under the leadership of Diane Greene, remains committed to growth as it tries to chase down larger rivals Amazon and Microsoft. Google is also expanding its data centers for internal use, whether it’s search or YouTube.
“Our view is it gives you a lens into our outlook for growth,” said Ruth Porat, Alphabet’s chief financial officer, in a briefing with reporters on Monday. “It’s search and ads, it’s newer businesses, it’s also the importance of machine learning. We’re looking for additional compute capacity given our outlook for growth.”
Costs in the first quarter were even higher, coming in at $7.3 billion, because of a $2.4 billion charge for buying Chelsea Market in New York. Excluding that one-time item, the second quarter marked the biggest percentage increase in capital expenditures since 2014.
Earlier this year, Google gave the public its first clear sense of the size of the cloud business. CEO Sundar Pichai, told analysts in February that between the G Suite productivity apps and the Google public cloud for hosting apps, the company was generating $1 billion in revenue per quarter.
Alphabet provides a limited view about growth. In the first quarter there was no major cloud update — only that cloud was one category that contributed to revenue expansion for Alphabet as a whole.
Google’s determination to grow in the cloud is reflected in other ways. Across Alphabet, cloud has been one of the biggest areas for hiring in the past two years. Porat said in April that Alphabet had higher sales and marketing costs in the first quarter partly because of advertising investments tied to cloud, as well as hardware and the Google Assistant.
— CNBC’s Josh Lipton contributed to this report.
