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Alphabet delivered a strong fourth-quarter earnings beat, but it was the company’s eye-popping plans for artificial intelligence infrastructure spending that truly grabbed Wall Street’s attention.

On Wednesday, Google’s parent revealed that capital expenditures in 2026 are expected to land between $175 billion and $185 billion. At the top end, that would represent more than double what Alphabet spent in 2025, instantly resetting expectations for AI investment across the tech industry.

Despite topping forecasts on revenue, earnings per share, and cloud growth, Alphabet shares slipped in extended trading. The muted reaction highlights a broader market concern: even as demand for AI explodes, investors remain cautious about how much capital Big Tech is pouring into the race.

Wall Street Cheers Results, Questions the Price Tag

Alphabet’s earnings showed clear momentum. Google Cloud revenue jumped nearly 48% year over year, and the company reported strong performance across advertising and services. Yet the stock still drifted lower after hours, signaling that markets are increasingly sensitive to the scale and pace of AI spending.

Alphabet had previously warned of a “significant increase” in capital expenditures for 2026, but the range disclosed this week surpassed expectations and outpaced guidance from its hyperscaler rivals.

The announcement effectively raises the bar for the entire sector.

Microsoft recently reported $37.5 billion in capital expenditures for its latest quarter and indicated spending would decline sequentially in the current period, without offering a full-year figure. Meta has guided for 2026 capex between $115 billion and $135 billion, compared with $72.2 billion last year. Amazon is set to report earnings shortly, with analysts projecting 2025 capital spending of about $124.5 billion, rising roughly 18% this year to around $146.6 billion.

Alphabet’s forecast now sits well above those figures, underscoring just how aggressively Google is leaning into AI infrastructure.

Where the Money Is Going

Alphabet CFO Anat Ashkenazi said the bulk of the planned investment will be directed toward expanding AI compute capacity for Google DeepMind, scaling cloud infrastructure to meet surging customer demand, and funding strategic “other bets.”

She added that capital will also be used to enhance user experiences across Google’s products and improve advertiser return on investment.

Breaking down last year’s spending offers a glimpse into what lies ahead. In 2025, roughly 60% of Alphabet’s capital expenditures went toward servers, while the remaining 40% was allocated to data centers and networking equipment. That same mix is expected to continue as the company builds out massive AI clusters and global cloud facilities.

The urgency is clear. Google Cloud’s backlog surged 55% sequentially and more than doubled year over year, reaching $240 billion by the end of the fourth quarter. That pipeline reflects long-term customer commitments for AI and cloud services, and it is driving Alphabet’s need to rapidly expand physical infrastructure.

A Market on Edge Over AI Spending

Alphabet’s spending surge comes at a delicate moment for technology stocks. Even with solid earnings across much of the sector, software shares have fallen sharply over recent months as investors worry that AI could disrupt existing business models and make today’s heavy investments harder to justify.

Until now, Alphabet had largely avoided major stock swings and was among the top performers of 2025. But the scale of its new capex guidance is testing investor confidence, especially as companies race one another to build data centers, secure power, and lock in chip supply.

Still, from Alphabet’s perspective, the investment is unavoidable.

AI Demand Is Forcing a Historic Buildout

Executives used Wednesday’s earnings call to highlight strong AI adoption across Google’s ecosystem.

The company’s flagship AI product, Gemini, now boasts 750 million monthly active users, up from 650 million in the prior quarter. CEO Sundar Pichai also emphasized Google’s deepening partnership with Apple, noting that the iPhone maker selected Google as its preferred cloud provider as part of plans to integrate Gemini models into Siri.

When asked what worries leadership most, Pichai didn’t hesitate: compute capacity.

He pointed to constraints around power availability, land, and supply chains, all while demand for AI services continues to accelerate at an extraordinary pace.

To support that growth, Alphabet agreed in December to acquire data center operator Intersect for $4.75 billion in cash plus assumed debt, adding to its global footprint of facilities designed to handle AI workloads.

Internally, the pressure is even more stark. Google’s head of AI infrastructure, Amin Vahdat, has told employees that the company must double its serving capacity roughly every six months just to keep up with customer demand.

The competition for AI infrastructure, he said, is both the most critical and the most expensive front in the AI race.

The Bigger Picture

Alphabet’s massive 2026 spending forecast signals a new phase in the global AI arms race. While investors may be uneasy about the near-term financial impact, the company is betting that controlling compute, cloud, and data center capacity will define long-term winners in artificial intelligence.

With cloud backlog at record levels, Gemini adoption accelerating, and enterprise demand still climbing, Alphabet is choosing to spend now to secure its place at the center of the AI economy.

Whether Wall Street ultimately rewards that strategy will depend on how quickly these investments translate into sustained revenue growth and operating leverage. For now, Alphabet has made one thing unmistakably clear: it plans to outbuild its rivals and reshape the scale of AI infrastructure for years to come.

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