Alphabet is doubling its capital expenditure to a staggering $180 billion in 2026 — earnings suggest that the company's AI investments may be paying off

During Google's Q4 earnings call last week, the company announced that it expects to double 2025's capital expenditure figures up to $185 billion, as reported by Reuters. This is around $70 billion more than analysts expected, and while it did send Alphabet stock falling 3%, it's one of the few companies investing heavily in AI that has continued to see stocks rise over the past six months.

This isn't the kind of wanton spending that the early AI infrastructure deals of 2025 felt like, however. Google has real data, and to an extent, real revenue to back their words up. Its cloud computing business grew almost 50% in the last quarter of 2025 to $17.7 billion, and overall revenue reached $114 billion - a close to $20 billion increase on the previous quarter.

Perhaps more importantly for infrastructure roll-out and investment, Google claims it has managed to reduce the serving unit costs for its Gemini AI by 78% throughout 2025 by improving model optimization and efficiency.

With claims that its Gemini monthly user numbers have now reached 750 million, Google is closing in on ChatGPT's dominant 800 million+ userbase and its extensive mindshare. Although there's no real winner in the AI race yet (save for perhaps Nvidia), Google definitely seems to be pulling ahead, and that may only be compounded this year as it continues its investment.

The full stack approach

Unlike other standout AI companies, Google has the luxury of bringing what it calls a "full stack approach" to AI. Google has the software with its own AI, it has its own Tensor Processing Units (TPU), so it's less reliant on Nvidia and other AI accelerator manufacturers - although it is also a big buyer of Nvidia GPUs and is getting some of the first Vera Rubin GPUs later this year.

Alphabet also has an existing infrastructure of data centers for serving cloud-based products to consumers and businesses alike. It has a flourishing cloud computing industry, which it can slot Gemini into as another service it offers. Gemini is also part of its existing Google One subscription model, offering access to those who already pay for cloud storage. It also integrates Gemini with its existing word processing tools. It's likely to be the go-to AI option on every smartphone once the Apple deal is done.

All this gives Google many more levers to pull when it comes to monetising AI, too. It can bundle it as part of standard Google service subscriptions to aid adoption. It can integrate it with its advertising systems to open up new revenue options. Alphabet's chief business officer, Phillip Schindler, told analysts during the earnings call that Gemini was helping Google to deliver adverts for longer, more complex search queries that were previously hard to monetize.

All of this has put Google in a position where it can maintain the incredible momentum in AI spending its run on througout 2025, and that makes it an outlier. As Reuters reports, Google was the only company to increase its capital spending in Q4. Considering the size of its planned capital expenditure for 2026, it may be hard for even some of the largest firms to catch up.

Even Google needs growth

During the earnings call, Alphabet's finance chief, Anat Ashkenazi, told analysts that Google was facing a cloud computing backlog of $240 billion. Those are commitments the company has pledged to meet, and hasn't yet got the capacity to handle.

The majority of Google's planned expenditure in 2026 will be spent on reducing this backlog and expanding AI compute power for Google DeepMind. Ashkenazi continued to highlight that Google's 2025 investment was focused on technical infrastructure like servers, data centers, and networking equipment.

Google's head of AI Infrastructure, Amin Vahdat, told staff in November that Google would need to double its AI serving capacity every six months to meet the demand being placed on its cloud computing divisions. Even factoring in Google's planned investment and efficiency savings from the latest models, that's a tall order.

Despite the backlog, Google keeps taking on more orders for capacity. Google's backlog for its cloud computing business for Q3 2025 was a mere $155 billion. That's more than $100 billion in unfulfilled orders in just a few months. Spending its way out of this successful hole may be Google's only way forward.

"We've been supply-constrained, even as we've been ramping up our capacity," Google CEO Pichai said during the recent earnings call. "Obviously, our capex spend this year is an eye towards the future."

Google might be leading this race, but there is no finish line in sight, and even with genuine revenue coming from its AI divisions and plans to expand that in the future, the spending required to retain momentum in AI is eye-watering. When even multiple trillion-dollar companies are chasing their tail, it's hard to know how it will all work out.