Google’s Record Q2 Search Business: From Search Empire to AI Empire — A Defender Becomes the Attacker?

TradingKey - Global search giant Google (GOOG) has delivered a strong rebuttal to concerns that AI could disrupt search business. With a record-breaking second-quarter revenue, AI-driven search growth, and increased capital spending, Google is signaling that its “All in AI” strategy is no longer just defensive — it’s an offensive push to transform from a search empire into an AI empire.

In its earnings report released on July 23, Google reported Q2 2025 results that beat both revenue and earnings expectations, driven by a record performance in its search business — now enhanced by artificial intelligence.

AI Powers Search Growth

CEO Sundar Pichai said AI is positively impacting every part of the company, fueling broad-based strength. The search business delivered double-digit revenue growth, supported by new AI-powered features like AI Overview and AI Mode.

The AI Overview tool, which uses Google’s Gemini AI model to generate direct answers, saw its monthly active users grow from 1.5 billion last quarter to over 2 billion.

This feature now directly competes with AI models from OpenAI and others, offering users synthesized responses without requiring them to click through multiple links.

Doubling Down on AI Infrastructure

To support ongoing AI model development and data center expansion, Google announced it is raising its full-year capital expenditures from $75 billion to $85 billion — a 13% increase and significantly higher than the $52.5 billion spent in 2024.

This investment underscores Google’s commitment to not just keep pace with AI innovation, but to lead it.

Defying the AI Disruption Narrative

Since the launch of ChatGPT, investors and analysts have worried that AI-powered chatbots — capable of answering complex questions directly — could erode Google’s traditional search model, where users type queries and click through results.

But double-digit search growth suggests the opposite: Google’s core business remains resilient, even as it evolves.

Pichai argued that AI is expanding how people search and consume information. Rather than replacing search, AI features are driving more searches, as users realize search can now fulfill more complex needs.

Morningstar analysts said they welcome Google’s integration of AI into search, noting that these new features are critical to maintaining relevance, especially among younger users, and open up new monetization paths for generative AI.

Initially, Google’s AI push was seen as reactive — a survival move to protect its search dominance. Today, leadership frames it as evolution: AI isn’t replacing search; it’s redefining it.

Bank of America said the solid performance in search reinforces confidence in Google’s AI transition and could ease concerns about potential revenue disruption.

However, challenges persist:

• Reduced click-through rates: A Pew Research Center study found that users who see AI-generated summaries are less likely to click on other website links — a trend that could threaten Google’s ad-driven revenue model over time.
• Competition is shifting: While Google is embedding AI into search, rivals like OpenAI and Perplexity are building AI-first browsers, creating a new kind of competitive threat.