Is Google Cloud winning the AI era?

Welcome to Runtime! Today: Google Cloud's strong AI-fueled second-quarter earnings results will put even more scrutiny on AWS and Microsoft next week, AWS gets lucky after an embarrassing security incident, and the latest enterprise moves.

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Don't be feeble

Early in 2023, as Microsoft strutted around the tech world on a victory lap for a contest that had yet to really begin, CEO Satya Nadella said of the company's longtime rival Google, "I want people to know that we made them dance." Two years later, Google Cloud is definitely dancing.

Revenue from Google's enterprise cloud services hit $13.6 billion during the second quarter, an increase of 32% compared to last year, the company announced Wednesday. "We see strong customer demand, driven by our product differentiation and our comprehensive AI product portfolio," CEO Sundar Pichai said on a conference call presenting the results, citing several stats that the company believes demonstrates that momentum.

During the second quarter, Google Cloud doubled the number of signed deals worth more than $250 million compared to last year.
During the first half of 2025, It also "signed the same number of deals over $1 billion that we did in all of 2024," Pichai said, which probably includes the $1.2 billion deal ServiceNow recently signed with Google, according to Bloomberg.
Brand-new Google Cloud Platform infrastructure customers increased by 28% compared to the first quarter of 2025, suggesting that Google Cloud's sales folks had a very good week in Las Vegas last April.
And CFO Anat Ashkenazi reported that the "Google Cloud backlog increased 18% sequentially in Q2 and 38% year-over-year, reaching $106 billion at the end of the quarter."

Google Cloud also more than doubled its operating profit for the quarter, which helps set aside fears in some corners that the huge expenses required to play in the enterprise AI big leagues are preventing anybody from making any money. The company announced plans to increase its capital expenditures for the year to $85 billion, up from previous guidance of $75 billion.

That's more than Microsoft pledged to spend during its 2025 fiscal year, which ended last month.
"Our updated outlook reflects additional investment in servers, the timing of delivery of servers and an acceleration in the pace of data center construction, primarily to meet cloud customer demand," Ashkenazi said.
The company also expects to increase CapEx further in 2026, but said it will provide more details on that plan at a later date.
Those details could shed light on how much capacity OpenAI intends to purchase from Google over the next year.

There's no question Microsoft has benefited handsomely from its decision to back OpenAI and kick off an industry-wide dance party after the release of ChatGPT in late 2022, but next week we'll know more about whether its momentum has shifted. The company has laid off thousands of employees in recent weeks, and Nadella sent out a company-wide memo Thursday that wasn't exactly full of sunshine and rainbows in kicking off its 2026 fiscal year.

"I also want to acknowledge the uncertainty and seeming incongruence of the times we’re in," Nadella wrote, given how many people Microsoft has said goodbye to over the past few months while making more money than it ever has before.
Sooner or later, enterprise tech companies of a certain age must confront a big problem: They need to keep their current customers happy and stable while reorienting themselves around emerging technologies.
"This is inherently hard, and few companies can do both," Nadella wrote.

However, by virtue of arriving pretty late to the enterprise business, Google Cloud now has a chance to move faster than Microsoft and AWS to capture enterprise AI spending.

Judging by its second quarter, it is making the most of that opportunity.

Q is for quandary

AWS got an up-close-and-personal experience with the software supply-chain security problem this week after 404 Media reported that a hacker inserted a malicious prompt into the Visual Studio Code extension it built for Amazon Q, one of its AI coding tools. The prompt theoretically could have deleted all the data from the computers of anyone who installed the extension, although the hacker seemed more interested in making a point than causing real harm.

According to 404 Media, the hacker simply submitted a pull request to the GitHub account for the extension and was granted "admin credentials on a silver platter," which allowed them to insert the prompt into a version of the extension that AWS released to users. AWS said it removed the hacker's access to the account and released a clean version of the extension, but it doesn't appear that it actually told users what happened until after the report surfaced.

While anyone at Microsoft working on the SharePoint disaster would gladly trade places with the AWS folks responsible for that extension, the whole affair is an extremely bad look for the company. "Maintaining a transparent and timely incident response mechanism, even for pre-emptive removals, is essential to building trust with developer communities, especially as AI agents increasingly operate with system-level autonomy,” IDC's Sakshi Grover told CSO.

Enterprise moves

Pete DeJoy is the new CEO of Astronomer, taking over the helm at the data company after Andy Byron resigned following … that whole thing.

Matt McClernan is the new CEO of Augment Code, after joining the company as chief revenue officer last year.

Dan Bikel is the new head of AI at Writer, a newly created position that will "lead Writer’s in-house research lab to advance the technical engine behind Writer’s end-to-end agent platform."

The Runtime roundup

IBM stock plunged after the company missed Wall Street estimates for revenue from its software business, and in an even worse sign for the company, Jim Cramer predicted that it's about to have a "fantastic quarter."

Shares of ServiceNow rose more than 4% after it reported earnings that beat Wall Street expectations and raised its guidance for the year, citing AI business.

C3.ai CEO Tom Siebel plans to step down once the board of directors names a replacement after developing an autoimmune disease earlier this year.

Thanks for reading — see you Tuesday!