Alphabet, the parent company of Google, has announced a significant increase in its capital spending for 2026, with a target of $175 billion to $185 billion, as it continues to invest heavily in artificial intelligence (AI) technology. This marks a substantial increase from the $115.26 billion that analysts had expected the company to spend this year, according to data compiled by LSEG.
The company’s aggressive spending on AI is part of its efforts to stay ahead in the AI race, with Google Cloud revenue growing 48% to $17.7 billion in the fourth quarter ended December. This growth is driven by the increasing demand for cloud services and the need to fuel the development of AI technologies and products. Google Cloud, along with its rivals Amazon Web Services and Microsoft‘s Azure, has been facing capacity constraints that have limited its ability to fully capitalize on AI demand from its customers. The company’s investments in AI have shown strong progress, with the launch of its Gemini 3 model in November receiving a strong reception and propelling the company forward in the AI arms race.
The launch of Gemini 3 has had a significant impact on the AI landscape, with OpenAI CEO Sam Altman reportedly issuing an internal “code red” to accelerate development. Google‘s Gemini AI assistant app has exceeded 650 million users per month, while its AI Overviews feature in search has reached over 2 billion monthly users. The company has also struck a deal to power Apple‘s revamped Siri voice assistant with its Gemini models, unlocking a huge market for Google with Apple‘s installed base of over 2.5 billion devices. Meta, Microsoft, and Google are expected to collectively spend over $500 billion on AI this year, with Meta increasing its capital investment for AI development by 73% and Microsoft reporting record quarterly capital expenditure.
The significant increase in capital spending by Alphabet has had an immediate impact on the company’s stock, with shares falling more than 6% in extended trading. Despite concerns from investors about the payoffs from AI investments, Google has been able to demonstrate strong progress in its AI efforts. As the company continues to invest heavily in AI, it will be important to watch how its investments pay off and how the AI landscape evolves in the coming year.
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