Sundar Pichai, Alphabet Inc. CEO, at the Bloomberg Tech Conference in San Francisco, California, USA, Wednesday, June 4, 2025.
David Paul Morris | Bloomberg | Getty Images
Google parents Alphabet Wall Street beat expectations for the fourth quarter, but there’s a new, higher bar for expected spending on artificial intelligence infrastructure.
Regardless exceeds earnings, earnings per share and cloud expectations, shares of parent Google fell in extended trading on Wednesday, suggesting Wall Street remains sensitive to AI spending.
Alphabet said it expects capital spending to be between $175 billion and $185 billion in 2026. The high end of this forecast would be more than double its 2025 capital expenditures.
With the forecast, Alphabet reset annual expectations for how it will spend in 2026, testing its profits on Wall Street. This was reported by the company October It said it expected “significant growth” in capital in 2026, but shared forecasts on Wednesday outperformed those of its hyperscalar peers.
In its quarterly report last week Microsoft did not offer a specific outlook for the year, but said capital would “decline consistently” this quarter after the company reported spending $37.5 billion in the latest period. Meta it said it expects to spend between $115 billion and $135 billion in 2026, nearly double last year’s figure of $72.2 billion.
Amazon results will be announced on Thursday. Analysts expect the company’s 2025 market capitalization to reach about $124.5 billion, and that figure will grow 18% this year to $146.6 billion, according to FactSet.
Alphabet’s increased spending comes at a time when Wall Street is particularly sensitive to additional AI spending.
Despite positive technological gains, the software sector has lost 30% of its total value over the past three months, CNBC reports Michael Santoli said. This is due to concerns that AI tools will improve existing software and risk high costs. So far, Alphabet has been largely immune to any major stock moves, especially after it became one. top performers 2025
But even as Wall Street balks at massive spending, tech companies are racing to build additional infrastructure to meet consumer demand for AI services.
Google’s cloud division, which includes most of its AI products and services, saw its backlog grow 55% sequentially and more than double year-over-year to $240 billion at the end of the fourth quarter, Alphabet Chief Financial Officer Anat Ashkenazi told analysts on Wednesday. Google recorded a nearly 48% increase in cloud revenue compared to a year ago.
Capital spending planned for 2026 will focus on investing in AI computing capabilities for Google DeepMind and meeting “significant demand from cloud customers, as well as strategic investments in other bets,” Ashkenazi said.
He also said it will be used to “enhance the user experience and get a higher advertiser ROI on Google services.”
Ashkenazi explained how Alphabet used capex in 2025, which could indicate how the company might invest this year.
“The vast majority of our capital was invested in technical infrastructure, with approximately 60% in servers and 40% in data centers and network equipment in the fourth quarter,” Ashkenazi said.
Explaining the increase in capex, executives played up AI wins for the quarter on Wednesday’s call.
Gemini, Google’s flagship AI app, now has 750 million monthly active users, up from 650 million last quarter, executives said. Alphabet CEO Sundar Pichai addressed the company’s work deal together Apple Overhauling its Siri virtual assistant with Gemini AI models, the iPhone maker reiterated its choice of Google as its cloud provider of choice.
When asked what keeps executives up at night, Pichai said “the ability to calculate.”
“Whether it’s energy, land, supply chain constraints, how do you scale to meet the unique demand of the moment?” he said.
Alippe agreed in December get data center company Intersect took on $4.75 billion in cash and debt.
Pichai’s comments echo CNBC reporting it showed that the company was under expensive pressure to build quickly.
Google’s head of AI infrastructure, Amin Wahdat, told employees that the company needs to double its capacity every six months to keep up with demand for its AI services, according to CNBC reported in November.
“Competition in AI infrastructure is the most important and also the most expensive part of the AI race,” Vahdat said at the time.