Google boosts AI investment to $185 billion
Google is gearing up for one of its most significant investment years to date, as it significantly increases spending to bolster artificial intelligence, cloud computing, and data centers. The tech giant’s robust growth in advertising and cloud revenues has instilled confidence to increase capital expenditure, despite investor concerns that AI investments might be outpacing returns, as reported. On Wednesday, Alphabet, the parent company of Google, announced its expectation for a significant increase in capital expenditure in the upcoming year, highlighting the pivotal role that AI plays in its long-term strategy. Google announced that it now anticipates capital spending in 2026 to range from $175 billion to $185 billion, which is nearly double the levels of the previous year and significantly exceeds analyst estimates of approximately $120 billion. The report indicated that the company would persist in making substantial investments as it develops AI infrastructure throughout its operations. Spending has already accelerated. In the fourth quarter, capital investment surged to $27.9 billion, nearly doubling from the same period last year. Total capital expenditure for 2025 amounted to $91.4 billion.
In recent months, Google has made significant strides in the AI race following the launch of new versions of its Gemini models. The company has depended on robust cash flows and its proprietary tensor processing units to engage more assertively with competitors like OpenAI. Chief Executive Officer Sundar Pichai stated that the company’s financial strength enables it to invest significantly without compromising its core businesses. He stated that demand for Google’s products is increasing universally. Pichai stated that the scale of investment reflects long-term demand rather than short-term trends. He noted that the demand for computing power at Google DeepMind and within the cloud business is exceptionally robust, with customer demand increasing at a pace that outstrips the addition of new capacity. Despite the strong results, Google shares initially declined by over 7 percent in after-hours trading following the release of the capex numbers. The stock subsequently regained some ground; however, it remained down approximately 1.5 per cent, according to the report.
Investors are becoming increasingly wary regarding AI expenditures throughout the technology sector, expressing concerns that companies are allocating funds at a pace that outstrips revenue growth. Concerns also affected Microsoft shares last week following its forecast of capital spending exceeding $140 billion this year. In contrast, Meta’s shares experienced an increase following the demonstration that AI was directly enhancing advertising performance. In the fourth quarter, Google’s net profit surged by 30 per cent year-on-year, reaching $34.5 billion, surpassing analyst expectations of $31.9 billion. Alphabet reported a total profit of $132 billion for the year 2025. The company’s core search and advertising business maintained robust growth, alleviating concerns that AI chatbots are diverting users. Revenue from search and ads increased by 17 percent to $63.1 billion in the quarter, surpassing market expectations. Chief Business Officer Philipp Schindler stated, “AI has improved Google’s ability to understand user intent,” which has enabled the company to place ads on longer and more complex searches that advertisers are willing to pay more for, according to the report.
Free cash flow increased to $24.5 billion in the quarter and reached a total of $73.3 billion for the year, bolstering confidence in Google’s capacity to finance its AI initiatives. Alphabet shares have risen by 61 per cent over the past year, elevating its market value beyond $4 trillion and positioning it as the world’s third-largest company. Pichai also emphasized the growth of the Gemini app, which currently boasts 750 million monthly users, although it still falls behind OpenAI’s ChatGPT, which asserts over 850 million weekly users.
