Why Alphabet Is Raising Its AI Spending

Alphabet, the parent company of Google, announced a dramatic increase in planned capital expenditures for 2026. The company will invest between $175 billion and $185 billion to expand servers, data centers and networking so it can scale artificial intelligence services and cloud capacity. This planned doubling of spending reflects the intense industry competition to build AI infrastructure.

In the fourth quarter, Alphabet posted revenue of $113.83 billion and net income of $34.45 billion, roughly a 30 percent year-on-year rise. Google Cloud was a major driver, with revenue growing 48% to $17.7 billion. Executives reported that rising cloud demand and the need for specialized hardware have pushed the company to accelerate its buildout.

Investors reacted quickly: shares fell in after-hours trading as markets weighed the trade-off between near-term costs and long-term gains. The company expects higher depreciation and operating expenses as new assets come online, but it also expects the additional capacity to support product launches and enterprise AI contracts.

While the spending plan is large, the company frames it as a necessary step to meet customer demand and to maintain engineering momentum; the outlays will be made over time and will focus on technical infrastructure rather than short-term marketing or R&D alone. Analysts had expected about $115 billion in capital spending for the year, so the new guidance represented a sharp increase. The company noted that timing and delivery schedules will affect when cash is spent and that depreciation will rise as more assets are placed into service. Many cloud providers are making similar long-term capacity investments.