Alphabet on Wednesday again raised already huge estimates for capital spending in 2026, telling investors that expenses may top $200 billion as it races to build the computing power necessary for its artificial intelligence ambitions.
The Google parent projected capital expenditure of between $195 billion and $205 billion in 2026, up from a previous estimate of as much as $190 billion and above the about $186 billion that analysts had estimated.
The higher guidance reflects the company’s efforts to hasten its expansion of AI computing capacity and book more revenue from cloud-computing clients.
It threatens to intensify investor scrutiny of Alphabet’s AI investments. Wall Street has been searching for evidence that the company’s massive investments on the technology are generating new growth rather than dampening profits. As the first major US technology company to report earnings this season, Alphabet’s results will shape expectations for a sector that has collectively committed hundreds of billions of dollars to AI infrastructure.
“The new raise in capex does not sit well for Alphabet,” Investing.com senior analyst Thomas Monteiro said. “Add to that an increasing rates environment and a continuous supply-demand crunch in AI infrastructure, and the notion that the company would fund itself with cash flows forever might be starting to fade.”
Alphabet shares fell 4 per cent in after-hours trading on Wednesday. The stock closed at $342.09 a share in New York.
The spending guidance overshadowed what were otherwise solid second-quarter results for the company. Cloud revenue totalled $24.77 billion for the period ending June 30, up 82 per cent from a year earlier and above the $22.46 billion that analysts had expected.
The company’s cloud backlog, a measure of contracted work that has not yet been recorded as revenue, grew to $514 billion, up from about $460 billion a quarter earlier.
The cloud results were “powered by strong demand for AI infrastructure and AI solutions", Alphabet's chief executive Sundar Pichai said in the call with analysts.
Google Cloud has emerged as one of the clearest tests of whether Alphabet’s AI spending can deliver financial returns. Although it still trails behind Amazon Web Services and Microsoft Azure, the unit has become one of Alphabet’s fastest-growing businesses, fuelled by demand from AI start-ups and enterprise customers seeking the infrastructure needed to develop and install AI applications.
While the higher spending outlook could fuel concerns from investors, Mr Monteiro said, cloud sales is at least a clear sign that the company’s investments are “converting into fast-growing, profitable revenue, with contracted deals coming online the moment capacity is built".
Google said most of its cloud backlog involves typical contracts with “a broad mix of customers”, and that it expects to recognise more than half of it as revenue over the next 24 months.
