Alphabet on Wednesday said it expects capital spending could roughly double this year, signaling an aggressive expansion of investments in AI-related infrastructure. The company set a target for capital expenditure in the range of $175 billion to $185 billion, a substantial rise compared with analysts' average estimates compiled by LSEG of about $115.26 billion for the year.
Shares in the Google parent were volatile in after-hours trading, initially sliding as much as 6% before recovering some of the losses, as market participants balanced concerns about the scale of the spending increase with quarterly results that topped expectations.
CEO Sundar Pichai said the company raised its spending outlook "to meet customer demand and capitalize on the growing opportunities we have ahead of us." He added that Alphabet is seeing its AI investments and corresponding infrastructure investments drive revenue and growth across businesses.
Alphabet spent $91.45 billion in 2025, primarily on AI infrastructure such as servers, data centers and networking equipment, compared with its prior projection for total spending last year of between $91 billion and $93 billion. The new spending guidance represents a sharp escalation from that level.
Growth at Google Cloud, where early returns from AI spending are becoming apparent, contributed to the stock's rebound after the initial after-hours decline. The cloud unit posted revenue of $17.7 billion in the fourth quarter ended December, up 48% year over year and well ahead of analysts' average estimate of a 35.2% increase, according to LSEG data.
Analysts noted the significance of Google Cloud's performance relative to peers. Gil Luria of D.A. Davidson observed that Google Cloud's growth was far ahead of expectations and, importantly, outpaced Microsoft Azure for the first time in several years. He said the acceleration in Google Cloud appears to support the company's elevated capital expenditure plans.
For the December quarter, Alphabet reported total revenue of $113.83 billion, beating the LSEG-based analyst estimate of $111.43 billion. Adjusted earnings per share were $2.82, also ahead of the consensus estimate of $2.63.
The broader cloud-computing industry has been deploying very large sums to expand AI infrastructure, driven by enterprise demand for cloud services and by the vendors' own needs to develop AI technologies and products. Major cloud providers have encountered capacity constraints that have limited their ability to fully monetize AI demand from customers, prompting substantial investment to increase capacity.
Alongside peers such as Meta and Microsoft, the big cloud operators are expected to commit very large amounts to AI-related spending this year. The article notes Meta recently increased its capital investment target for AI development by 73% to a range of $115 billion to $135 billion, while Microsoft reported record quarterly capital expenditure. Those moves underscore a broader industry trend toward heavy investment in AI infrastructure.
Investors have grown increasingly attentive to the question of returns from these AI expenditures, given the scale of spending. Despite that scrutiny, the company has demonstrated tangible progress in AI development. Alphabet's launch of its Gemini 3 model in November received strong reception and has been cited as advancing the company in the AI competition. In the wake of that release, OpenAI's CEO reportedly issued an internal directive to accelerate development.
Alphabet also reported momentum in user adoption for AI products. Sundar Pichai said the Gemini AI assistant app surpassed 750 million monthly users, an increase of 100 million from November. In addition, Alphabet struck an agreement to power Apple's updated Siri voice assistant with its Gemini models, opening access to a large installed base of devices.
Market context and takeaways
- Alphabet's announced capex target of $175-185 billion represents a step-change from its 2025 spending of $91.45 billion and from analysts' expectations for the current year.
- Strong cloud revenue growth - 48% year-over-year to $17.7 billion in the December quarter - provided evidence of early returns on AI investments and helped temper investor concern over higher spending.
- The company's quarterly revenue of $113.83 billion and adjusted EPS of $2.82 exceeded consensus, reinforcing the view that AI-related investments are translating into near-term financial gains.
Key points
- Capital expenditure target raised to $175-185 billion this year, signaling a major increase in AI infrastructure investment.
- Google Cloud revenue grew 48% to $17.7 billion in the fourth quarter, surpassing expectations and outpacing a major competitor's growth rate for the period.
- Quarterly results beat LSEG analyst estimates on both revenue and adjusted earnings per share.
Risks and uncertainties
- Investor concern about the pace and scale of AI-related capital spending - heightened spending prompted volatile after-hours share trading, indicating market sensitivity to large outlays.
- Capacity constraints in cloud infrastructure may limit the ability of providers to fully capture AI-driven customer demand until investments come online, affecting cloud revenue realization.
- Large industry-wide capital commitments to AI carry uncertainty about the timing and magnitude of returns, which could influence technology-sector valuations and capital allocation decisions.