Sundar Pichai, chief executive officer of Alphabet Inc., during the Bloomberg Tech conference in San Francisco, California, US, on Wednesday, June 4, 2025.
David Paul Morris | Bloomberg | Getty Images
Google parent Alphabet beat Wall Street’s expectations for its fourth quarter but a new, high bar for expected spending on artificial intelligence infrastructure tempered enthusiasm.
Despite exceeding expectations on revenue, earnings per share and cloud, the Google parent’s shares kept dipping in extended trading Wednesday, showing Wall Street remains sensitive toward AI spending.
Alphabet said it expects 2026 capital expenditures to be in the range of $175 billion to $185 billion. The top end of that forecast would be more than double its 2025 capex spend.
With the projection, Alphabet is resetting the year’s expectations for how it’ll spend in 2026 and testing its favor with Wall Street. The company said in October that it expected “a significant increase” to capex in 2026, but the projections shared Wednesday surpassed those of its hyperscaler peers.
In its quarterly report last week, Microsoft didn’t provide a specific forecast for the year, but said capex will “decrease on a sequential basis” this quarter, after the company reported spending of $37.5 billion in the latest period. Meta said it expects to spend between $115 billion and $135 billion in 2026, which at the high end would be almost double last year’s figure of $72.2 billion.
Amazon reports results on Thursday. Analysts expect the company’s capex for 2025 to close at about $124.5 billion and for that figure to increase 18% this year to $146.6 billion, according to FactSet.
Alphabet’s spend increase comes at a time when Wall Street has been particularly sensitive to extra AI spend.
Despite positive tech earnings, the software sector as a whole has lost 30% of its value in the last three months, CNBC’s Michael Santoli said. That’s due to concerns that AI tools will upend existing software tools and make higher spending riskier. Up until this point, Alphabet has been largely spared from any major stock moves, especially after it was one of the top performers of 2025.
But while Wall Street balks at the bountiful spending, tech companies are racing to build more infrastructure to keep up with customer demand for AI services.
Google’s cloud unit, which houses most of its AI products and services, saw its backlog surge 55% sequentially and more than double year-over-year, reaching $240 billion at the end of the fourth quarter, Alphabet finance chief Anat Ashkenazi told analysts on a call Wednesday. Google recorded a nearly 48% increase in cloud revenue compared to a year ago.
The planned 2026 capex spend will go toward investing in AI compute capacity for Google DeepMind and to meet “significant cloud customer demand as well as strategic investments in other bets,” Ashkenazi said.
She added that it would also be used to “improve the user experience and drive higher advertiser ROI in Google services.”
Ashkenazi broke down how Alphabet used capex in 2025, which could signal how the company may invest this year.
“The vast majority of our capex was invested in technical infrastructure with approximately 60% of that investment in servers and 40% in data centers and networking equipment in Q4,” Ashkenazi said.
In between explaining the Capex increase, executives on Wednesday’s call played up AI wins from the quarter.
Google’s flagship AI app Gemini now has 750 million monthly active users, up from 650 million last quarter, executives said. Alphabet CEO Sundar Pichai leaned into the company’s deal with Apple to overhaul the Siri virtual assistant using the Gemini AI models, reiterating that the iPhone-maker had chosen Google as its preferred cloud provider.
When asked what keeps executives up at night, Pichai responded “compute capacity.”
“Be it power, land, supply chain constraints, how do you ramp up to meet this extraordinary demand for this moment?” he said.
In December, Alphabet agreed to acquire data center company Intersect for $4.75 billion in cash and the assumption of debt.
Pichai’s comments reflect CNBC’s reporting that showed the company is under pricey pressure to build quickly.
Amin Vahdat, Google’s AI infrastructure boss, told employees that the company has to double its serving capacity every six months in order to meet demand for AI services, CNBC reported in November.
“The competition in AI infrastructure is the most critical and also the most expensive part of the AI race,” Vahdat said at the time.
