The arrangement, finalised in May 2025 after months of negotiations, went live this quarter, making OpenAI one of Google Cloud’s biggest customers to date.

Sundar Pichai, CEO of Google, confirmed the deal during Alphabet’s second-quarter earnings call, stating:

“We are very excited to be partnering with them on Google Cloud. Google Cloud is an open platform, and we have a strong history of supporting great companies, startups, AI labs, etc. So super excited about our partnership there on the cloud side, and we look forward to investing more in that relationship and growing that.”

OpenAI’s demand for compute has surged to historic levels, with projections indicating over one million GPUs will be online by the end of 2025. Its longer-term goal involves scaling to 100 million GPUs over the next decade. 

This explosive growth has outpaced Microsoft Azure’s capacity, the company’s primary cloud partner, forcing OpenAI to look elsewhere.

Google Cloud, once kept at arm’s length by OpenAI due to its rivalry with Microsoft and shared ambitions in AI, now enters the scene with a compelling offer: access to Nvidia’s top-tier H100 and GB200 GPUs, custom-built TPUs, and a mature infrastructure trusted by leading AI research outfits including Anthropic, Fei-Fei Li’s World Labs, and Ilya Sutskever’s Safe Superintelligence.

The exclusivity OpenAI once held with Microsoft ended quietly in January 2025. Under the new “right of first refusal” framework, OpenAI gained the freedom to diversify its backend. 

The company’s operations now span data centres in Oregon, Iowa, Frankfurt, Milan, Singapore, and Tokyo, optimised for low-latency inference and strict sovereign compliance. Workloads are split across Azure and Google Cloud using orchestration tools like Kubernetes, Anthos, and Istio.

This development reveals the pressure OpenAI faces in scaling its services while maintaining uptime, responsiveness, and sustainability commitments. Both firms have pledged to power AI workloads with 100% carbon-free energy, and will publish energy transparency metrics in line with grid-optimised strategies.

While OpenAI remains the most direct threat to Google’s crown jewel, Search, the economic logic behind this partnership is clear. Google Cloud posted a $13.62 billion revenue haul in Q2 2025, up 32% year-on-year. 

Much of that growth comes from AI workloads, prompting Alphabet to raise its capital expenditure target for the year to $85 billion, noting “strong and growing demand” across both AI and cloud services.

Still, the optics are awkward. OpenAI’s ChatGPT product has chipped away at Google’s dominance in Search, forcing the tech giant to hasten development on its own generative AI offerings like Gemini. 

That chatbot now reaches 450 million monthly users, while AI Overviews on Search reportedly sees 2 billion monthly users. But the monetisation strategy behind those products is not well explained.

Some analysts are comparing this move to Google’s early relationship with Yahoo, when it quietly powered Yahoo Search in its early days, only to displace it as the internet’s front page. 

Hopefully, history will not repeat itself.

The company’s shares surged by nearly 4% following the release, with a strong performance in its advertising business helping to ease investor doubts. Google’s ad revenue saw an 8.5% rise in the first quarter, an encouraging figure given the challenges facing the digital ad market.

Even with fears that the U.S. ad market could be hit by trade tensions, particularly from major advertisers like Temu and Shein scaling back, Alphabet’s solid results show resilience. 

Some analysts had feared a slowdown, spurred by rising tariffs and economic instability, but Alphabet’s performance reveals a different picture. “Against the backdrop of negative sentiment and data checks, regulation woes, competition concerns and macro-related fears, Alphabet reported a blow to bears, with strong growth across all major segments,” Deutsche Bank’s Benjamin Black commented.

This growth comes as Alphabet continues to press ahead with its AI initiatives, which are now seeing substantial uptake. The company announced that its AI-generated search summaries, or “AI Overviews,” now have 1.5 billion users per month.

“Google is in a race versus OpenAI, Perplexity, and others to drive AI usage, and we continue to believe Google has data and distribution advantages,” noted BofA Global Research.

Alphabet’s total revenue for the quarter reached $90.2 billion, marking a 12% year-over-year increase, while net income jumped by 46% to $34.5 billion.

A major highlight was the announcement of a $70 billion share buyback plan, a move that has strengthened investor confidence in the company’s future.

Despite a slight slowdown in its cloud business, Google Cloud’s revenue still grew by 28% to $12.3 billion, showcasing the company’s continued push into cloud computing.

However, this growth was slightly below market expectations, and Alphabet’s ongoing investments in AI infrastructure are essential to maintaining its edge in the tech sector.

In the bigger tech industry, Alphabet’s strong earnings report helped lift the stock prices of other social media companies. Meta, Pinterest, and Snap all saw positive movements, indicating that positiveness around AI and digital advertising is beginning to ripple through the sector.

However, not all is plain sailing. Trade policy changes stemming from the Trump administration are expected to cause a challenge to Google’s ad revenue, especially as tariffs impact Asian-based retailers.

Yet, even with these, Alphabet’s performance has given the market a much-needed boost, showing that it remains top in both the AI and advertising spaces.

Bernstein’s Mark Shmulik stated, “Perhaps Dr. Google is just what this market needed — a healthy dose of strong fundamental performance.”