Alphabet said on Wednesday that its capital expenditure could nearly double this year, marking another major increase in spending as Google’s parent company ramps up investment to ease computing capacity constraints and strengthen its position in the AI race.
Alphabet and other major technology firms are expected to spend more than $500b combined on AI this year. Meta recently raised its AI-related capital investment by 73%, while Microsoft also reported record quarterly capital spending. The surge in spending comes even as investors question the returns from AI investments. Alphabet, however, has demonstrated strong progress in AI, with its shares climbing 76% since early 2025.
CEO Sundar Pichai said the company’s AI infrastructure and investment strategy are driving revenue and growth across its business. Alphabet executives highlighted spending on AI computing capacity—including servers, data centres, and networking infrastructure—as key to its plan to allocate between $175b and $185b in capital expenditure this year, up from $91.45b in 2025. Analysts had forecast spending of around $115.26b.
Alphabet’s stock fluctuated in after-hours trading, initially dropping 6% before recovering most losses as investors weighed increased spending against stronger-than-expected revenue and profit in the December quarter.
The company’s cloud division delivered particularly strong performance, with fourth-quarter revenue jumping 48% to $17.7b, surpassing analyst expectations and marking the fastest growth in more than four years.
Pichai said the company continues to face supply constraints despite expanding capacity, adding that the increase in capital expenditure is focused on long-term growth. He also expects capacity pressures to persist throughout the year.
Google’s AI credentials received a major boost following the launch of its Gemini 3 model in November, helping shift perceptions that the company was trailing in AI development. The strong reception accelerated competition, prompting rivals to speed up their own AI initiatives. Pichai said Google’s enterprise-focused Gemini platform has secured 8 million paid seats across 2,800 companies. The company also recently secured a major cloud partnership with Apple to support the iPhone maker’s AI services using Gemini technology.
Analysts noted that Google Cloud’s 48% growth outpaced Microsoft Azure for the first time in several years, reinforcing Alphabet’s justification for higher capital spending. Market watchers say Google has now firmly established itself as a hyperscale cloud provider alongside Amazon and Microsoft, with AI workloads driving strong enterprise demand.
Alphabet has previously pointed to its cloud business as evidence of AI-driven revenue growth, but its latest results also highlight expanding AI impact across other segments, including its core search business. Pichai said the Gemini AI assistant app now attracts over 750 million monthly users, up 100 million since November. Daily queries through AI Mode, a chatbot-style feature integrated into Google’s search engine, have also doubled since its launch.
Google’s chief business officer Philipp Schindler said Gemini has enabled the company to deliver advertisements on longer, more complex search queries that were previously difficult to monetise.
Alphabet reported total quarterly revenue of $113.83b, exceeding analyst forecasts of $111.43b. Adjusted earnings per share came in at $2.82, beating expectations of $2.63.
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