Google parent Alphabet predicts a sharp surge in 2026 capital spending on AI

Alphabet said on Wednesday it was targeting capital expenditure of $175 billion to $185 billion this year, in yet another aggressive ramp-up in spending from the Google parent as it deepens its investments to push ahead in the AI race.

Analysts on average had expected Alphabet to spend about $115.26 billion this year, according to data compiled by LSEG.

Shares of the company fell more than 6% in extended trading.

Revenue at Google Cloud grew 48% to $17.7 billion in the fourth quarter ended December, compared with analysts’ average estimate of a 35.2% jump, according to data compiled by LSEG.

Cloud computing majors have poured hundreds of billions of dollars to grow their AI infrastructure, both to meet the growing enterprise demand for their cloud services and to fuel their own development of AI technologies and products.

Like larger rivals Amazon Web Services and Microsoft’s Azure, Google Cloud has been grappling with capacity constraints that have dented its ability to fully cash in on AI demand from its customers.

Along with Meta, the three cloud companies are expected to collectively shell out more than $500 billion on AI this year. Meta last week hiked its capital investment for AI development this year by 73%, targeting spending between $115 billion and $135 billion, while Microsoft also reported record quarterly capital expenditure.

The aggressive expansion in outlay comes at a time when investors have increasingly grown concerned about payoffs from AI investments. However, Google has been able to show strong progress in its AI efforts.

The launch of its latest Gemini 3 model in November saw strong reception and propelled the company forward in the AI arms race. Following the launch, Sam Altman, CEO of AI frontrunner and ChatGPT-creator OpenAI, reportedly issued an internal “code red” to push teams to accelerate development.

Google’s Gemini AI assistant app exceeded 650 million users per month in November, while the company’s AI Overviews feature in search also reached more than 2 billion monthly users.

Last month, Google struck a deal to power Apple’s revamped Siri voice assistant with its Gemini models, a partnership that unlocks a huge market for Google, with Apple’s installed base of over 2.5 billion devices.

—Deborah Sophia, Reuters