Alphabet Lifts 2026 Capex Outlook Well Above Estimates

Alphabet topped projections for quarterly revenue and outlined an ambitious capital spending plan, far surpassing predictions, leveraging its growth to build out the data centers and infrastructure needed to lead in the AI age. The Google parent said capital expenditures would reach as much as $185 billion this year, compared with the $119.5 billion analysts expected. The company’s fourth-quarter sales, excluding partner payouts, were $97.23 billion, surpassing the $95.2 billion expected on average by analysts, according to data compiled by Bloomberg. Chief Executive Officer Sundar Pichai said the investments are paying off. “We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” he said Wednesday in a statement. “Search saw more usage than ever before, with AI continuing to drive an expansionary moment.” Google Cloud revenue was $17.7 billion, beating the $16.2 billion analysts expected. Bloomberg Intelligence Senior Global Head of Technology Research Mandeep Singh and Dan Ives, Global Head of Technology Research at Wedbush Securities, join Bloomberg Businessweek Daily to discuss. They speak with Carol Massar and Tim Stenovec. Alphabet Inc. is poised to spend more in 2026 than it has invested in the past three years combined to finance an unprecedented expansion of data centers critical to its artificial intelligence ambitions.

Google’s parent company said capital expenditures will reach as much as $185 billion this year, far exceeding the $119.5 billion that analysts had expected and double what it spent last year. That’s on the heels of a solid revenue beat in the fourth quarter, with $97.23 billion in sales excluding partner payouts surpassing estimates.

Chief Executive Officer Sundar Pichai worked to reassure investors on Wednesday that the costs are necessary. “We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” he said in a statement. “Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”

Read More: Alphabet Results Show Big Growth, Heavy Spending: Street Wrap

Still, Alphabet shares fell 3.2% to $322.52 at 9:34 a.m. in New York, the biggest intraday decline since May. The stock is still up nearly 70% from a year ago. Google has raced to reinvent its business for the AI age, working to keep consumers in the habit of going to its search page even when they could also go to chatbots from rivals like OpenAI. The company has quickly improved its Gemini AI model and integrated it across products — an effort that has required massive investment in data centers and chips for model improvement and cloud customers.

The company has said its massive investments in AI — funding new infrastructure, research and talent — are essential for competing against rivals including Amazon.com Inc., Microsoft Corp. and OpenAI.

About 40% of the company’s technical infrastructure investments were tied to data centers and networking equipment, while 60% were tied to servers, said Anat Ashkenazi, Google’s chief financial officer, on a conference call to discuss earnings. Pichai acknowledged that the company would have to plan for constraints on what would be possible, including those of power and supply chains.

To justify its heavy spending, Alphabet continued to demonstrate momentum in its cloud and search advertising businesses. The company has been incorporating Gemini 3, its latest model, in all its products, including its Chrome browser. The Gemini app also saw 750 million active users through December, compared with 650 million in the three-month period ending in September. Backlog for the cloud business — or revenue under contract but not yet booked — more than doubled year over year, reaching $240 billion, Pichai said on the call.

“The increase in backlog was driven by strong demand for our cloud products, led by our enterprise AI offerings from multiple customers,” Pichai added. Gemini Enterprise has more than 8 million paid users, after launching four months ago.

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