As much as half of all the code produced at Alphabet, the parent company of Google, is being generated by artificial intelligence (AI) coding agents.
The use of AI to drive operational efficiency and free up more money to invest in AI capacity was one of the points made by Anat Ashkenazi, senior vice-president and chief financial officer of Alphabet and Google, during the company’s latest quarterly earnings call.
For its fourth quarter of 2025, Alphabet reported revenue of $114bn, up 18% year over year. For the full year, it posted revenue of $403bn, a 15% increase from the previous year.
The company is seeing a huge increase in demand for Google Cloud and its AI-powered services. During its latest earnings call, in a response that suggests Alphabet does not need to expand its software developer workforce, Ashkenazi said: “We look at coding productivity. About 50% of our code is written by coding agents, which are then reviewed by our own engineers. This certainly helps our engineers do more and move faster with the current footprint.”
Ashkenazi said 60% of Alphabet’s 2025 capital expenditure (capex) was allocated to servers, with the remaining 40% directed towards datacentres and networking equipment. A similar amount looks set to be spent in 2026, with Alphabet predicting it will spend between $175bn and $185bn on servers, datacentres and networking equipment. Its latest quarterly earnings call suggests capex is primarily focused on AI infrastructure and technical innovation to meet growing demand.
While Google does not have the breadth of AWS services or the deep corporate foothold of Microsoft, its steady effort to win enterprise customers is now turbocharged by its AI-native cloud offerings Lee Sustar, Forrester
There is increasing concern in stock markets that the huge investments in AI infrastructure will not deliver a return on investment. In response to questions about AI capacity challenges and compute demand, Sundar Pichai, CEO of Alphabet and Google, said: “We’ve been supply-constrained, even as we’ve been ramping up our capacity. Obviously, our capex spend this year is an eye towards the future, and you have to keep in mind, some of the time, horizons are increasing in the supply chain. So, we are constantly planning for the long-term and working towards that. And, obviously, how we close the gap this year is a function of what we have done in the prior years. And so there is that time delay to keep in mind.”
The investment in AI infrastructure is needed to support demand for Google Cloud and the AI services the company provides. The quarterly filing shows Google Cloud’s annual run rate is over $70bn.
Pichai said Google Cloud has sold more than eight million paid seats of Gemini Enterprise, its AI platform, to over 2,800 companies. He also stated that over 120,000 enterprises use Google’s Gemini AI models, including major companies such as Airbus, Honeywell, Salesforce and Shopify, with existing customers increasing their spending, outpacing their initial commitments by over 30%.
“Nearly 75% of Google Cloud customers have used our vertically optimised AI, from chips, to models, to AI platforms, and enterprise AI agents, which offer superior performance, quality, security and cost-efficiency. These AI customers use 1.8 times as many products as those who do not, enabling us to diversify our product portfolio, deepen customer relationships and accelerate revenue growth,” added Pichai.
Forrester’s principal analyst, Lee Sustar, said: “Google Cloud’s quarterly revenue jump of 48% over the same period a year earlier is decisive evidence that it is a full-blown enterprise challenger to AWS [Amazon Web Services] and Microsoft Azure. While Google does not have the breadth of AWS services or the deep corporate foothold of Microsoft, its steady effort to win enterprise customers is now turbocharged by its AI-native cloud offerings. But this comes at a hefty price for parent Alphabet, which saw capital expenditure for the fourth quarter effectively double the amount of a year earlier.”
