It’s Google’s world—AI is just living in it

TL;DR: Google’s latest earnings report points to a monster year, with the company breaking past $400 billion in annual revenue for the first time in 2025—mostly thanks to AI. After declaring a “code red” in late 2022 over ChatGPT’s launch, the success of Gemini—which has since been integrated across Google’s products—seems to show that the search giant hasn’t just absorbed the AI shock; its AI model may prove to be a huge upgrade to Google’s long-established empire.

What happened: Alphabet’s earnings call yesterday afternoon left little room for doubt—the AI race is Google’s to lose. Revenue rose about 18% year over year, topping $113 billion last quarter. Search ad revenue jumped by 17%. YouTube ads grew by 9%, and Google Cloud revenue jumped 48%. And a lot of this growth was urged on by AI.

In other words: The AI disruption didn’t shrink Google. It lit a fire under it. This marks a stark shift from the urgency of late 2022, after Google slammed the panic button in the wake of ChatGPT’s runaway success and rushed to get a competing product on the market. The first Gemini model was unveiled in December 2023 and was initially met with skepticism about whether Google could catch up in the AI race. Cut to November of last year, when the release of Gemini 3 got near-universal praise.

During yesterday’s call, CEO Sundar Pichai repeatedly pointed to its AI model’s deep integration with Google’s other offerings as a key factor in the company’s quarterly boom: Gemini is now woven into Search, Cloud, Workspace, and YouTube. (Apparently, over 20 million YouTube viewers used the relatively new Gemini-powered “Ask” tool in December, which can answer questions about a video that you’d also likely get by… actually watching the video.)

The bottom line is that Google is all in on AI. Analysts expected Google to spend around $115 billion on capital expenditures this year. The company revealed it’s thinking more along the lines of $175 to $185 billion, heavily weighted toward AI infrastructure. That enormous number seemed to startle investors, leading to a slump in Google’s share price.

How AI boosted Search: After ChatGPT was released in late 2022, there was some indication that people were using Google Search less thanks to the chatbot. But, according to Pichai, Google Search use is now higher than ever—largely because of its Gemini-powered upgrade, which can “better understand your query, dive deeper on the web, and generate interactive UI experiences." People are using this AI Mode for longer, more complex sessions than regular Google Search. Pichai also said that the standalone Gemini app doesn’t appear to be “cannibalizing” Google Search activity at this point.

There’s money in the Cloud: The company’s cloud computing sector is where AI captured new growth for the company, with enterprise clients handing over almost $18 billion last quarter.

Still, Cloud revenue is chump change compared to Google’s ad business. It’s the largest digital advertising seller in the world (and, if you ask the DOJ, maintains an illegal monopoly). Recent AI-driven improvements to Google’s existing products led to more engagement, which led to more ad impressions, and—you guessed it—that led to a lot more ad money.

Scale beats novelty: Google’s recent success is really a story about AI helping to keep people in its existing ecosystem. And that, in turn, is a testament to its dominant position as a tech behemoth that was already offering a wide range of services and devices for both consumers and businesses, long before most of us knew what an LLM was. The Gemini app now has over 750 million monthly active users—and while that still lags ChatGPT’s reported 810 million, it’s a rapid climb from mid-2025, when Gemini had about 450 million monthly users. Google also said that it lowered the cost of serving answers in Gemini—a significant cost of running AI models—by about 78% last year.

On top of attracting more consumers, more than 120,000 enterprises use Gemini, including big-name customers like Salesforce, Airbus, Shopify, and soon Apple, which recently announced it’s using Gemini to power the new Siri. Apple will reportedly pay Google around $1 billion a year, but the company refused to say more about the partnership during the earnings call.

All of this doesn’t mean Google can rest on its laurels, but it does mean displacing it will take a lot more than building a better model or shipping faster demos. First movers get attention—Goliaths still rake in the revenue. —WK