Can Google Keep Its Balance with Gigantic Capex?

There was a surprise tucked into the strong quarterly results Google Cloud parent Alphabet reported last night: Google plans to spend between $175 billion and $185 billion on capital expenditures in 2026—more than doubling the $91 billion it spent in 2025 and exceeding the spending plans of most of its rival hyperscalers.

Alphabet plans to spend heavily on Google DeepMind, its AI research lab, and on Google Cloud expansion. It will also plan to hire talent in AI and Cloud.

But the sheer size of the capex guidance disturbed investors. As of this writing (midday on February 5), shares were selling at $325.53, down roughly 2.30%. This despite otherwise stellar results that signal Google Cloud’s move from also-ran a few years back to major contender in the AI space.

A quick rundown: Quarterly revenues of $113.8 billion were up 18% year-over-year (y/y); for the year, sales of $403 billion rose 15%, thanks to a surge in Search and Google Cloud. Google Cloud revenues for the quarter were $17.7 billion, up 48% y/y and indicating an annual run rate of $70 billion. Net income of $34.5 billion was up 30% y/y, and adjusted earnings per share was $2.82, up 31% y/y.

Why There Are Questions on Capex

So what’s not to love? Google is hitting on all cylinders, advancing agentic AI in all its applications. Its Gemini 3 model is a hit, with 750 million monthly active users, lower than the 900 million weekly active users claimed by OpenAI, but still impressive. Google Cloud’s backlog at the end of December 2025 was $240 billion.

There are several concerns. First is the sheer size of the projected capex, which at the upper limit is more than double the $91 billion Alphabet spent in 2025. If the company spends its projected limit, that would represent roughly 46% of its potential annual revenues (given 2025’s sales of $402 billion). In 2025, Alphabet capex was about 26% of revenues.

This isn’t the first time Alphabet has significantly increased capex. In 2024, it posted $52.5 billion in capex, or about 21% of revenues. Compare that to 2023, when the company spent $32 billion, or about 10% of sales. Still, $185 billion for 2026 would be a 250% increase in spending from 2024.

Notably, the other hyperscalers are also increasing their capex projections too. Amazon reported on February 5 that it plans to expand its capex to a whopping $200 billion this year. Meta is said to be down for $135 billion in 2026; Microsoft for up to $120 billion; and Oracle for $50 billion.

Can Alphabet afford its monumental projection? The company insists that it needs to invest aggressively to meet the opportunities it sees in the market. “And certainly, with the demand we're seeing, whether it's from external customers or across the organization, the more capital we can free up within the organization to invest, the better we can turn this flywheel of making investments to drive future growth.,” said Alphabet CFO and SVP Anat Ashkenazi on the earnings call.

The question is, Can Alphabet keep its balance while spending so much on AI infrastructure? The answer could be yes, as long as growth continues to escalate in the manner the company demonstrated in its latest earnings. Still, investors worry that the bet may be bigger than the reality.

The Depreciation Question

Since Alphabet plans to spend most of its capex this year on AI infrastructure, depreciation will increase on the balance sheet. Here’s how CFO Ashkenazi described it on the call with investors:

“In terms of expenses, as we've discussed on previous calls, the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expense and related data centers' operations costs such as energy.

“In 2025, depreciation increased by nearly $6 billion, or 38%, from $15.3 billion in 2024, to $21.1 billion in 2025. Given the increase in our CapEx investments in recent years, we expect the growth rate in 2026 depreciation to accelerate in Q1, and meaningfully increase for the full year.”

Can the Demand Be Met without Breaking the Bank?

Alphabet management says it’s proceeding carefully, trying to balance its spending against efficiencies in other areas. But the question remains as to whether it can gen up the AI infrastructure fast enough to justify what it says is booming demand. Other providers, including Microsoft and Oracle, have hit roadblocks in getting datacenters up and running, with power being a major concern.

Notably, Google is not alone among big tech companies declaring that demand for AI infra is outstripping supply. Given its huge capex projection, how well Google maintains its financial balance in the coming year could make it a bellwether for the market in general.

One investor on last night’s call asked what kept management up at night. CEO Sundar Pichai answered:

“But I think specifically at this moment, maybe the top question is definitely around compute capacity, all the constraints, be it power, land, supply chain constraints, how you ramp up to meet this extraordinary demand for this moment. Get our investments right for the long-term and do it all in a way that we are driving efficiencies and doing it in a world-class way.

“So that's where I think we are meeting the moment well, but it's definitely an area where we're spending a lot of time.”

Futuriom Take: Alphabet's astounding capex news show it is betting big on Google Cloud, Search, and AI research. It's one of the largest bets in the industry that shows it's commitment to becoming the market leader in both cloud and AI.