Alphabet has raised its 2026 capital expenditure guidance to $195 billion-$205 billion.
The company is investing heavily in AI infrastructure as demand for Google Cloud and AI services continues to grow.
While stronger cloud revenue boosted quarterly results, the higher spending outlook sparked fresh investor concerns over returns from AI investments.
Google Parent Alphabet Doubles Down on AI, Plans Up to $205 Billion in 2026 Capex
The Google parent increased its 2026 capital spending guidance as it expands AI infrastructure, even as investors weigh the cost of its aggressive investment strategy
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Alphabet Inc. has increased its projected capital spending for 2026 to between $195 billion and $205 billion, raising its previous guidance as it accelerates investments in artificial intelligence (AI) infrastructure.
The revised outlook is higher than the company's earlier forecast of up to $190 billion and exceeds analysts' expectations of around $186 billion.
The increased spending is aimed at expanding AI computing capacity and supporting growing demand for Google Cloud services, although it is also expected to intensify investor scrutiny over whether Alphabet's massive AI investments are generating sufficient returns.
Cloud Business Drives Growth
Alphabet reported Google Cloud revenue of $24.77 billion for the quarter ended June 30, an 82% increase from a year earlier and ahead of analysts' expectations of $22.46 billion.
The company's cloud backlog—a measure of contracted business yet to be recognised as revenue—grew to $514 billion, up from about $460 billion in the previous quarter.
Chief Executive Officer Sundar Pichai said during the company's earnings call with analysts that the cloud business was "powered by strong demand for AI infrastructure and AI solutions." The company added that it expects to recognise more than half of its cloud backlog as revenue over the next 24 months.
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Higher Spending Raises Investor Questions
Alphabet's higher capital spending guidance overshadowed an otherwise strong quarterly performance and renewed concerns over the cost of its AI expansion.
Thomas Monteiro, Senior Analyst at Investing.com, told Bloomberg that the higher capex guidance may not be well received by investors, particularly amid higher interest rates and continued supply constraints in AI infrastructure. However, he noted that strong cloud revenue suggests the company's AI investments are beginning to translate into profitable growth.
Alphabet's shares fell 4% in after-hours trading following the earnings announcement.
Search, YouTube and Gemini Remain Key Focus Areas
Alphabet reported capital expenditure of $44.92 billion during the second quarter, ahead of Wall Street estimates of $44.15 billion, while total revenue excluding partner payouts reached $103.6 billion, beating analysts' expectations.
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The company's search advertising business generated $63.27 billion in revenue, slightly below estimates, while YouTube reported $11.1 billion in revenue, exceeding market forecasts.
Alphabet also said Gemini AI reached 950 million monthly active users. Pichai highlighted progress on the company's next-generation Gemini 4 model as Google continues expanding its AI offerings to compete in both consumer and enterprise markets.