Google goes from laggard to leader as it pulls ahead of OpenAI with stellar AI growth
By Kenrick Cai and Deborah Mary Sophia
SAN FRANCISCO, Feb 4 (Reuters) – Alphabet is taking on OpenAI with a gusto that underscores Wall Street’s perception that the Google parent is the leader in AI, a turn of events from a year ago when investors thought it was badly lagging behind rivals and punished its stock.
Alphabet executives struck a more confident tone on the company’s post-earnings call on Wednesday, the first since it released the Gemini 3 model, which has wowed users and helped Google catch up in the artificial intelligence race.
Though it did not mention its chief AI rival by name, Alphabet’s newly confident messaging emphasized a key contrast: Investments in AI have begun to reap returns throughout the entire company. That served as Alphabet’s justification to potentially double its capital expenditures in 2026 – to between $175 billion and $185 billion – as a result of massive investments into AI computing capacity.
Alphabet’s prepared remarks about AI in 2025 had focused on product usage and AI revenues generated specifically via its cloud-computing unit.
“Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board,” CEO Sundar Pichai said.
Google’s fresh conviction about AI-fueled revenue is backed by growth in both its consumer and enterprise businesses.
Pichai said the Google Gemini app, which competes with OpenAI’s ChatGPT, exceeded 750 million monthly active users at the end of the December quarter, up from 650 million at the end of the prior period. That still trails ChatGPT, which OpenAI CEO Sam Altman said in October had eclipsed 800 million weekly active users.
“We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3,” Pichai said.
Gemini 3 has also been integrated into “AI Mode” in Google’s search engine and powers Google’s enterprise version of Gemini, which Pichai said on the call had reached 8 million paying licenses.
Google’s surging capex forecast initially alarmed investors, sending the stock down by as much as 6% in after-hours trading. But a strong showing from its cloud unit – revenue was up 48% in the December quarter – and an AI-powered boost across the rest of its business quickly reinforced Wall Street’s confidence that Google’s AI bets are beginning to pay off.
That further validated Wall Street’s current message to tech companies: Soaring AI spending can continue only if tech companies demonstrate commensurate financial returns.
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