Alphabet says rising demand for AI-powered services is driving growth in its business, even as investors wonder when the massive AI spending across the industry will translate into sustainable returns. | Photo credit: Dado Ruvic
Alphabet shares were volatile in after-hours trading, falling 6% before paring losses as investors weighed the increase in expenses against rising revenue and profit, both of which beat expectations in the December quarter. The company said it is targeting capital expenditures of $175 billion to $185 billion this year, a huge jump from average analyst expectations that it would spend about $115.26 billion this year, according to data compiled by LSEG.
CEO Sundar Pichai said in a press release that Alphabet has increased expected spending “to meet customer demand and capitalize on the growing opportunities ahead.”
He added: “We see our AI investments and infrastructure driving revenue and growth across the board.”
The company spent $91.45 billion in 2025, mainly on AI infrastructure, including servers, data centers and networking equipment. That compares with projections for total spending of between $91 billion and $93 billion last year. Growth in Google’s cloud division, where the company is enjoying early returns on AI investments, helped the stock limit losses. The unit’s revenue grew 48% to $17.7 billion in the fourth quarter ended December, compared with analysts’ average estimate of a 35.2% increase, according to data compiled by LSEG.
“Google Cloud’s growth far exceeded expectations and outpaced Microsoft Azure for the first time in years,” said Gil Luria, DA Davidson analyst. “The acceleration in Google Cloud seems to justify the increased investments.”
The company reported total revenue of $113.83 billion for the quarter, surpassing analyst estimates of $111.43 billion (according to LSEG data). Adjusted earnings per share of $2.82 also beat expectations of $2.63.
Cloud computing majors have poured hundreds of billions of dollars into expanding their AI infrastructure, both to meet growing enterprise demand for their cloud services and to fuel their own development of AI technologies and products.
Like bigger rivals Amazon Web Services and Microsoft’s Azure, Google Cloud has faced capacity constraints that have affected its ability to take full advantage of its customers’ AI demands.
Together with Meta, the major cloud companies are expected to collectively spend more than $500 billion on AI this year. Meta last week increased capital investment for AI development by 73% this year, with spending expected to range between $115 billion and $135 billion, while Microsoft also reported record quarterly investments.
The aggressive expansion of spending comes at a time when investors are increasingly concerned about the returns on AI investments. However, Google has been able to show strong progress in its AI efforts.
The launch of its latest Gemini 3 model in November received a strong reception and propelled the company forward in the AI arms race. Following the launch, Sam Altman, CEO of AI leader and ChatGPT maker OpenAI, reportedly issued an internal ‘code red’ to push teams to accelerate development.
Google’s Gemini AI assistant app exceeded 750 million monthly users, Pichai said, up 100 million from November.
Last month, Google struck a deal to power Apple’s revamped Siri voice assistant with its Gemini models, a partnership that opens up a huge market for Google, with Apple’s installed base of more than 2.5 billion devices.
Published on February 5, 2026
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