Google parent Alphabet (GOOG) (GOOGL) reported a top- and bottom-line beat for the fourth quarter, a trend that has been quite predictable for some time, but what stupefied Wall Street was the eyeball-popping capital expenditure budget for the year, which is just shy of touching a couple hundred billion dollars.
The Sundar Pichai-led company said it expects capital spending between $175B and $185B in 2026, which is more than a 100% increase from last year at the higher end of the range.
The U.S. tech giant said it would allocate about 60% of the budget for machines and servers and about 40% for long-duration assets such as data centers and network equipment.
The company calls the capex increase a “brutal pace” necessary to stay ahead in the artificial intelligence race against its rivals, namely Meta (META), Amazon (AMZN), and Microsoft (MSFT).
Over half of Google’s machine learning compute power will go toward its Cloud business, the company said. Even then, it pointed out that it is supply constrained, and its greatest obstacle is compute capacity.
Word on the Street
J.P. Morgan: “Importantly, we believe the doubling of capex Y/Y comes from a position of strength, with Gemini now at 750M MAUs & showing significantly higher engagement per user, Google Cloud revenue accelerating to +48% w/backlog up 55% Q/Q to $240B, & Search revenue accelerating to +17% as AI continues to expand the market,” the research firm said.
“The significant step-up in capex will weigh on FCF—we model $29B this year (-61%)—but Google currently has a net cash balance of $80B. While some might say the financial profile and outsized spending shifts Google closer to Meta, we believe we are seeing clear returns on Google’s investments across Gemini, Cloud, and Search, and Google differentiates with very meaningful multi-year backlog.”
RBC Capital Markets: “While the substantial capex guidance will pressure Street FCF ests, it’s driven by demand signals across Google’s distinctive integration of infrastructure, frontier LLM development, and unmatched distribution, which are differentiated & essential for monetizing AI at the necessary scale,” the research firm said.
Jefferies: The research firm said the doubling of capex reflects swelling AI and cloud and noted that its investments are paying off. The FY26 capex guide is the “highest of any hyperscalers” and reflects confidence in demand and ROI across the company’s portfolio.
The capex is “a massive investment in absolute terms. GOOGL’s high profitability, generous cash flows, and strong balance sheet should more than cover capex needs.”
Wedbush: “While the planned spending is significant and will likely pressure margins, we view the investment this year constructively, as it will support ongoing adoption and growth across AI infrastructure, GenAI solutions, and core GCP products,” the research firm said.
Wolfe Research: “We see continued proof points of AI investments accelerating trends at both Search & Cloud. We expected CapEx raise given our $140B CapEx est. vs. the Street’s $115B. Mgmt’s guide of $175 – $185B came in above our and some buyside expectations. That said, we believe lack of visibility on EBIT $ expansion may put a temporary lid on shares,” the research firm said.
Roth Capital: “We believe Google and the rest of the hyperscaler pack are in the middle of a multi-year AI infrastructure build. In our opinion, 2026 looks less like a peak and more like a plateau at a very high run rate. With AI infra investments driving revenue growth across the board, including tied to Gemini model improvements, we view this CapEx range as an important factor in GOOGL’s ability to capture maturing AI compute demand,” the research firm said.
Bernstein: “If investors’ chief complaint earlier in the AI LLM/search wars was that Google wasn’t spending enough to keep up, they suddenly find themselves reversing course and wondering if Google is now spending too much with a 2026 CapEx guide of $175-185B, nearly 2xing investment levels Y/Y over year. And if there was any lingering doubt that management was being conservative, it certainly sounds like their biggest worry these days is how quickly they can spin up more capacity,” the research firm said.
Seeking Alpha analysts
Louis Gerard: Alphabet Inc. maintains a Strong Buy rating, driven by robust Q4 results and a $400B annual revenue milestone. Google Cloud revenue surged 48% to $17.7B, with backlog doubling year-over-year to $240B, underlining AI-driven upsell momentum. 2026 CapEx guidance is $175–185B, nearly double 2025, but justified by strong cloud demand and a rapidly expanding backlog.
Mike Zaccardi: Alphabet earns a buy rating, viewed as slightly undervalued after a post-earnings dip despite aggressive FY 2026 AI capex plans. Q4 results exceeded expectations: GAAP EPS $2.82 vs. $2.64 consensus, revenue $113.8B vs. $111.5B, with Google Cloud net sales up 48% YoY. Management guides for $175–$185B capex focused on AI and cloud, with EPS growth expected to slow to 5% in 2026 before rebounding to mid-teens.
Agar Capital: Alphabet delivered record Q4 2025 results with 18% revenue growth and 31% EPS growth, surpassing expectations. GOOGL’s core segments—Search, YouTube, and Cloud—showed robust expansion, with Cloud revenues up 48% and margins rising to 30%. The market reacted negatively to $175–$185B 2026 CapEx guidance, but I view this as a strategic investment strengthening GOOGL’s AI-driven competitive moat.
Cyn Research: Alphabet Inc. remains a Buy, driven by accelerating Search growth, surging Cloud momentum, and robust operating leverage. Q4 2025 revenue and EPS beat expectations, with GOOGL Search revenue up 17% YoY and Cloud revenue growth at 48%. Cloud backlog doubled to $240B, signaling sustained demand and justifying a significant CapEx ramp to $175–$185B in 2026.
Kenio Fontes: Alphabet delivered a solid Q4, with 18% YoY revenue growth and strong performance across key business lines. Despite a slight operating margin dip and surging CapEx, GOOGL’s aggressive R&D and AI investments are justified by rapid Cloud and Gemini ecosystem growth.
Jonathan Weber: Alphabet Inc. delivered record Q4 sales, beating estimates on both lines and achieving 18% revenue growth with accelerating momentum. GOOG’s growth was broad-based, led by Search at 17% and Google Cloud surging nearly 50%, while margins remained stable year-over-year. Management guides for $175–185 billion in 2025 capital expenditures, primarily for AI data centers, introducing uncertainty but supported by robust cash flows.