Everyone Said AI Would Kill Google. Its First-Ever $100 Billion Quarter Just Proved Them Wrong

Every story about Google starts and ends with search. It makes sense—Google is a search engine. It’s not only the company’s most important and profitable business, but it’s the thing that has defined the internet for two decades. But for most of the past two years, the biggest story about Google has been that artificial intelligence would, inevitably, make search obsolete. People would stop “Googling” things because AI chatbots could just tell them the answers. Search—the company’s $200-billion-a-year cash cow—was supposed to be doomed. On the one hand, the idea that people would no longer type queries into Google’s search box and then click on the blue links that show up on results pages was a doomsday scenario. And AI chatbots certainly made that look increasingly likely. Then again, that story always assumed Google would sit still while the world around it changed. It assumed the company that practically invented the modern internet—or at least the way most of us experience it—wouldn’t figure out how to adapt. On Wednesday, Alphabet, Google’s parent company, reported its first-ever $100 billion quarter. Revenue rose 16 percent to $102.3 billion. Net income jumped 33 percent to $34.98 billion. Those are not the numbers of a company whose main business is being disrupted. It’s more like the numbers of a company that’s quietly figuring out how to change with the behavior of its users. Google Search and YouTube each grew at a double-digit pace. “Google Search & other” revenue climbed 15 percent to $56.6 billion. YouTube ads rose 15 percent to $10.3 billion. Combined, Google’s advertising machine brought in more than $74 billion for the quarter. Not only that, but its cloud business grew by 35 percent over the previous year. That leads to the most interesting part of this story, which is the part about how Google is spending all that money. As it announced its earnings, Google said it would raise its capital expenditures, specifically as it invests in infrastructure to serve its cloud businesses. That’s the part of the business that powers its AI ambitions. Google made more money than ever from search, and it’s spending that money on AI. Training and running massive models requires staggering amounts of computing power. But that’s exactly where Google’s advantage lies—it already owns what is probably the largest global computing infrastructure ever built. Now, it’s doubling down. Alphabet expects to spend $91 billion to $93 billion in capital expenditures this year—mostly on data centers, networking, and custom chips designed for AI workloads. That’s up sharply from last year and puts Google in the same spending league as Amazon and Microsoft. And even with those huge investments, Alphabet’s operating margin—excluding a $3.5 billion European Commission fine—rose to 33.9 percent. In other words, it’s spending tens of billions to expand AI capacity while remaining one of the most profitable companies on the planet. Google’s strategy isn’t just about protecting search ads. It’s about using the strength of that business to fund a transformation into something bigger: the dominant AI platform. That’s still a big lift. Yes, Google is a household name, but it’s still behind in AI—at least in terms of consumer mindshare. OpenAI’s ChatGPT is the front-runner in terms of customer adoption, but Google has almost every other advantage. It has the technology, the infrastructure, and a built-in user base that already trusts it as the default source of information. And because Google controls so many layers of the stack—hardware, data centers, models, and consumer products—it can absorb the cost of AI adoption in a way startups and rivals can’t. It doesn’t have to rent the future on someone else’s platform; it’s already building it. Now, Google is doing something very few companies have ever pulled off: funding its own disruption without losing momentum. Search and YouTube are still massive profit engines, generating the cash Google needs to build the infrastructure for AI. Basically, Google doesn’t really care whether you type your queries into a search box or a chatbot window, as long as you keep asking it your questions. For all the hype about AI replacing search, this quarter makes one thing clear: Google’s biggest business isn’t dying. It’s evolving into something that could be far more lucrative. If the company’s $93 billion AI spending spree pays off the way Pichai expects, Google might have just figured out a better end of the story than search. EXPERT OPINION BY JASON ATEN, TECH COLUMNIST @JASONATEN