Google to Expand NeoCloud Capacity Rentals in Third Quarter

Surging demand for generative AI and cloud services has made computing capacity a key constraint for the world’s largest technology companies. Alphabet’s Google is turning to third-party NeoCloud providers because expansion of its own data-center infrastructure cannot keep pace. Renting external capacity can accelerate deployments and allow Google to serve more customers, though the higher cost of outsourced computing is expected to weigh on gross margins in the short term.

Alphabet executives said Google will expand its use of third-party NeoCloud computing resources beginning in the third quarter, aiming to close the infrastructure gap and capture more AI-related business. The company did not disclose the rental volume, contract value or a list of selected providers. Shares of cloud-computing specialists including Nebius and CoreWeave rose in after-hours trading as investors anticipated stronger demand from Google and potentially other hyperscale customers.