Alphabet Inc. Chief Executive Officer Sundar Pichai during the Bloomberg Tech Conference on Wednesday, June 4, 2025 in San Francisco, California, USA.
David Paul Morris | Bloomberg | Getty Images
Google’s parent company alphabet Fourth-quarter sales beat Wall Street expectations, but new high hurdles for expected spending on artificial intelligence infrastructure dampened enthusiasm.
Google’s parent company’s stock continued to fall in after-hours trading on Wednesday, despite better-than-expected revenue, earnings per share and cloud, showing Wall Street remains sensitive to AI spending.
Alphabet said it expects capital spending in 2026 to be in the range of $175 billion to $185 billion. The high end of this forecast would be more than double 2025 capital investment spending.
The forecast resets Alphabet’s annual expectations for spending in 2026, testing support from Wall Street. The company said in October that it expected capital spending to increase “significantly” in 2026, but the forecast shared on Wednesday exceeded that of fellow hyperscalers.
In last week’s quarterly report, microsoft did not provide specific guidance for this year, but said capital spending this quarter would be “lower on a quarter-over-quarter basis” after the company reported spending of $37.5 billion in the most recent period. meta said it expects to spend between $115 billion and $135 billion in 2026, nearly double last year’s $72.2 billion at the high end.
Amazon Results will be reported on Thursday. Analysts expect the company’s capital spending to end 2025 at about $124.5 billion, rising 18% to $146.6 billion this year, according to FactSet.
Alphabet’s spending increase comes at a time when Wall Street has become particularly sensitive to additional AI spending.
CNBC’s Michael Santori said that despite strong earnings at tech companies, the software sector as a whole has lost 30% of its value over the past three months. There are concerns that AI tools could upend existing software tools, increasing spending and increasing risk. Up until this point, Alphabet has been largely immune to major stock price movements, especially after becoming one of the top performers in 2025.
But while Wall Street balks at the massive spending, technology companies are racing to build out more infrastructure to meet customer demand for AI services.
Anat Ashkenazi, Alphabet’s head of finance, said on a conference call Wednesday that the backlog of Google’s cloud unit, which houses most of its AI products and services, grew 55% sequentially and more than doubled from a year earlier, reaching $240 billion at the end of the fourth quarter. Google recorded a nearly 48% increase in cloud revenue compared to a year ago.
The capital expenditures planned for 2026 will be used to invest in Google DeepMind’s AI computing power, Ashkenazi said, to meet the “significant demand of our cloud customers and investments in other strategies.”
He added that this will also be used to “improve the user experience and increase advertisers’ ROI on Google services.”
Ashkenazy detailed how Alphabet used its capital spending in 2025, which could indicate how the company will invest this year.
“The majority of our capital spending was invested in technology infrastructure, with approximately 60% of that investment in servers and 40% in data center and networking equipment in the fourth quarter,” Ashkenazy said.
In between discussing increased capital spending, executives on Wednesday’s conference call highlighted the quarter’s AI wins.
Google’s flagship AI app Gemini now has 750 million monthly active users, up from 650 million in the previous quarter, executives said. Alphabet CEO Sundar Pichai was leaning toward a deal with the company. apple We used Gemini AI models to overhaul the Siri virtual assistant, reiterating the iPhone maker’s choice of Google as its preferred cloud provider.
When asked what keeps executives up at night, Pichai said, “Numeracy.”
“How can we meet this extraordinary demand at this time, regardless of power, land and supply chain constraints?” he said.
In December, Alphabet agreed to acquire data center company Intersect for $4.75 billion in cash and assumed debt.
Pichai’s comments echo a CNBC report indicating the company is under costly pressure to build quickly.
CNBC reported in November that Google’s head of AI infrastructure, Amin Vahdat, told employees that the company needed to double its service delivery capacity every six months to meet demand for AI services.
“Competition in AI infrastructure is the most important and most expensive part of the AI race,” Vahadat said at the time.
