Alphabet said on Wednesday that its capital expenditure could as much as double this year, marking another aggressive increase in spending as the company accelerates investments to ease compute capacity constraints and strengthen its position in the global AI race.
Alphabet and other Big Tech firms are expected to spend more than $500 billion combined on artificial intelligence in 2026. Last week, Meta Platforms lifted its AI-related capital spending plans by 73%, while Microsoft also reported record quarterly capital expenditure.
The sharp rise in spending comes amid growing investor scrutiny over the returns from AI investments. Alphabet, however, has demonstrated tangible progress, with its shares up roughly 76% since the start of 2025.
“We are seeing our AI investments and infrastructure translate into revenue and growth across the business,” CEO Sundar Pichai told analysts on a conference call.
Executives said expanding AI computing capacity—including servers, data centers, and networking—underpins a targeted capital spending range of $175 billion to $185 billion this year, up from $91.45 billion in 2025. Analysts had expected spending closer to $115.26 billion, according to data compiled by LSEG.
Alphabet shares were volatile in after-hours trading, initially dropping about 6% before recovering to trade down roughly 1%, as investors balanced higher spending against strong quarterly results. Revenue and profit both exceeded expectations in the December quarter.
Cloud growth supports capex surge
Alphabet’s cloud division delivered standout performance, with fourth-quarter revenue jumping 48% to $17.7 billion—its fastest growth rate in more than four years and well above forecasts.
“We’ve been supply-constrained even as we’ve expanded capacity,” Pichai said, adding that this year’s capital spending is geared toward long-term demand. He noted that capacity constraints are likely to persist through much of the year.
The launch of Google’s Gemini 3 AI model in November reshaped perceptions of the company’s AI capabilities, helping it close the gap with leading rivals. Pichai said enterprise versions of Gemini have secured about 8 million paid seats across 2,800 companies. Google also recently struck a major cloud partnership with Apple to power AI features with Gemini models.
Analysts said the cloud unit’s growth has been pivotal. “Cloud growth of 48%—faster than Microsoft Azure for the first time in years—helps justify the capex increase,” said Gil Luria of D.A. Davidson. Ethan Feller of Zacks Investment Research added that Google has now established itself as a legitimate hyperscaler alongside Amazon and Microsoft, with AI workloads driving real enterprise demand.
Alphabet also highlighted momentum across other AI-enabled products. The Gemini assistant app now exceeds 750 million monthly users, up 100 million since November, while daily queries in AI Mode within Search have doubled since launch. Executives said these integrations are improving ad monetization for longer, more complex queries.
For the quarter, Alphabet reported revenue of $113.83 billion, beating estimates of $111.43 billion, while adjusted earnings per share came in at $2.82 versus expectations of $2.63.
