Alphabet Inc. said demand for artificial intelligence products boosted quarterly sales, and now requires an extreme increase in capital spending — heightening pressure on the company to justify the cost of keeping up in the AI race.

Alphabet shares rose more than 3% in early trading on Thursday as the Google parent's earnings underscored a key message to investors: AI spending is climbing, but so are the returns.

Google Cloud posted $13.6 billion in Q2 revenue, up 32% year-over-year, according to CFO Anat Ashkenazi, driven by growth in "core and AI products at a rate that was much higher than Cloud's overall revenue growth.