Alphabet, the parent company of Google, has significantly raised its capital expenditure plans for the year to $85 billion, with further increases expected in 2026. The decision follows a strong earnings report where the company surpassed Wall Street estimates, fueled by rapid growth in its cloud computing division and a resilient digital advertising market. Google Cloud revenue surged nearly 32%, outperforming expectations, as demand for AI-powered services continues to soar.
CEO Sundar Pichai emphasized that Alphabet is accelerating investments to meet rising demand for its cloud infrastructure, including AI tools like its in-house TPU chips, which compete with Nvidia’s GPUs. The company also revealed a surprising collaboration with OpenAI, which recently added Google Cloud as a supplier—an unexpected move given their rivalry in AI. Despite trailing Amazon’s AWS and Microsoft’s Azure in total cloud sales, Google Cloud’s customer base grew 28% quarter-over-quarter, signaling strong momentum.
While Alphabet’s earnings beat was impressive, some investors were caught off guard by the increased spending plans. “No one expected a $10 billion capex hike,” noted Dave Wagner of Aptus Capital Advisors. CFO Anat Ashkenazi acknowledged that supply constraints remain, with cloud demand still outpacing capacity. The aggressive spending has raised questions about near-term profitability, but Alphabet insists these investments are crucial to staying competitive, especially against Chinese tech rivals.
Google’s advertising revenue rose 10.4% to $71.34 billion, beating forecasts, while its AI features—such as AI Overviews and Gemini—are driving user engagement. Gemini now boasts 450 million monthly users, and AI Mode hit 100 million users just two months after launch. Analysts believe these successes may ease concerns about competition from ChatGPT. With total revenue reaching $96.43 billion, Alphabet’s bold bets on AI and cloud computing appear to be paying off—for now.