Google has announced that it intends to multiply its capital expenditures this year, reaching up to $185 billion, as robust development in its cloud and advertising businesses bolstered the search engine giant’s financial resources for its massive investment in artificial intelligence.
Alphabet, the parent company of Google, stated on Wednesday that the Mountain View, California-based corporation raised its estimate for capital expenditures in 2026 to a range of $175 billion to $185 billion, far above what analysts had estimated of roughly $120 billion.
In comparison to the previous year, the capital investment nearly multiplied to the tune of $27.9 billion in the fourth quarter, increasing spending to $91.4 billion in 2025.
Alphabet’s stock fell 5% in early trade on Thursday due to the sharp rise in expected capital expenditure.
With the release of new Gemini models in recent months, Google has gained distance on competitors like OpenAI in the AI battle thanks to its enormous revenue and cutting-edge in-house hardware.
The Chief Executive Officer, Sundar Pichai, has maintained that as its advertising revenue continues to rise and AI demand lifts its cloud computing arm, its massive AI investments will be bolstered by significant increases in earnings and cash flow.
“This year’s capital expenditures are an eye towards the future,” he stated. “There is a very high level of demand for our services across the board, and we need to invest in Google DeepMind and the cloud.”
Despite the significant investment in data centres and its own proprietary AI chips, known as TPUs, Pichai had stated that he still anticipates that customer and DeepMind research lab demand will exceed the new computing power it can bring online.
Investors also have been watching AI expenditure trends closely, and as revenues fall well short of the money being invested in the technology, there are growing concerns that a bubble may form in both the public and private markets.
Microsoft’s shares dropped more than 10% after the company revealed a significant increase in capital expenditures last week, which are now expected to surpass $140 billion this year. In contrast, Meta’s stock climbed on proof that its AI is improving advertising efficacy, outweighing concerns over its $135 billion annual capex forecast.
In the fourth quarter of last year, 2025, Google’s net income appreciated by about 30% to $34.5 billion, exceeding experts’ projections of $31.9 billion, as tabulated by FactSet. In 2025, Alphabet generated a $132 billion profit.
Revenue exceeded the average expectation of $111.3 billion by 18%, to $113.8 billion. Sales exceeded $400 billion annually for the first time.
Its primary search and advertising business generated $63.1 billion in revenue during the quarter, exceeding forecasts of $61.3 billion, growing 17% year over year. This helped reduce concerns that competitors’ AI chatbots, such as ChatGPT from OpenAI and Grok from Elon Musk, were only stealing users.
As Google boosts its conventional search results with “AI mode” and “overview” responses, as well as with the introduction of its Gemini chatbot, Pichai stated he “hasn’t seen any evidence of cannibalisation” of ad revenues.
The Chief Business Officer, Philipp Schindler, claims that AI has improved our comprehension of user intent, which “has significantly expanded our ability to deliver ads on longer and more complex searches” that advertisers are prepared to spend more for.
As the need for processing capacity to train and run AI models grows, cloud sales increased 48% to $17.7 billion compared to projections of $16.3 billion. The surge in cloud earnings, according to Jefferies analyst Brent Thill, “speaks to momentum in AI, Gemini, and the core businesses.”
By the end of December, Pichai stated that Google’s backlog of cloud contracts had grown to $240 billion, 55% higher than in September.
He continued, “The number of deals over $1 billion in 2025 surpassed the previous three years combined.”
Google’s free cash flow, which increased to $24.5 billion in the quarter from $14.3 billion in the last quarter of 2024 and reached $73.3 billion for the year, also gave investors hope.
After a 61% increase in the last 12 months, Alphabet’s market capitalisation has surpassed $4 trillion, making it the third-largest firm in the world, ahead of Microsoft.
Highlights from Pichai claim that the company’s primary consumer AI product is the Gemini app, which currently has 750 million monthly users, a 100 million increase over the previous quarter. This still lags behind industry leader OpenAI, which asserts that over 850 million individuals use ChatGPT every week.
This week, Google had to deal with a tumultuous market as software equities saw significant declines. The industry responded to new coding tools, especially those from the AI start-up Anthropic, which demonstrated that they could create programs on their own to automate back-office and legal procedures in a matter of hours.
The impact which the technology industry will have on the matter is because Broadcom (AVGO), one of the chip partners, anticipates receiving a sizable portion of Google’s bespoke chip purchases, where its shares increased 4%; Nvidia also witnessed increases.
On the other hand, Meta’s 2026 projection of $115–$135 billion is significantly smaller than Alphabet’s $185 billion promise.
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