The launch of Google’s Gemini 3 AI model in November reshaped the narrative around Google as an AI laggard. — Reuters
NEW YORK: Alphabet says that capital expenditure (capex) could as much as double this year, in yet another aggressive spending ramp-up by the Google parent as it deepens investments to allay constraints on compute capacity and push ahead in the artificial intelligence (AI) race.
Alphabet and its Big Tech rivals are expected to collectively shell out more than US$500bil on AI this year.
Meta last week hiked capital investment for AI development this year by 73%, while Microsoft also reported record quarterly capex.
The aggressive expansion in outlay comes at a time when investors have increasingly grown concerned about payoffs from AI investments.
Google, however, has been able to show strong progress in its AI efforts, and its stock has surged 76% since the beginning of 2025.
“We are seeing our AI investments and infrastructure drive revenue and growth across the board,” chief executive officer Sundar Pichai told analysts on a conference call on Wednesday.
Alphabet executives said that investments in AI computing power capacity – servers, data centres and networking equipment – were central to the company’s plans to target capex of US$175bil to US$185bil this year, up from US$91.45bil in 2025.
Analysts had expected on average that it would spend about US$115.26bil this year, according to data compiled by LSEG.
Alphabet shares were volatile in after-hours trading – falling 6% before recouping most losses to trade down just about 1%, as investors weighed the swell in spending against surging revenue and profit, both of which beat expectations in the December quarter.
Its cloud business in particular reported stellar growth in the fourth quarter ended December (4Q25), surging 48% to US$17.7bil, beating analyst expectations.
That represented the quickest pace of growth in more than four years.
“We’ve been supply-constrained, even as we’ve been ramping up our capacity,” Pichai said.
“Obviously, our capex spend this year is an eye towards the future.”
Pichai expects Alphabet to face continued capacity constraints through the year.
The launch of Google’s Gemini 3 AI model in November reshaped the narrative around Google as an AI laggard.
The strong reception propelled the company in the AI arms race and prompted rival OpenAI to issue an internal “code red” to push teams to accelerate development.
Google’s enterprise-grade Gemini model has sold eight million paying seats across 2,800 companies, Pichai said.
Last month, Google scored one of its biggest deals yet, a cloud partnership with Apple to power the iPhone maker’s AI offerings with its Gemini models.
The cloud division’s growth was “importantly higher growth than Microsoft Azure for the first time in several years,” helping the parent company to justify the capex hike, said Gil Luria, a DA Davidson analyst.
“Google has established itself as a legitimate hyperscaler alongside Amazon and Microsoft, with AI workloads driving real enterprise demand,” said Ethan Feller, stock strategist at Zacks Investment Research.
Alphabet executives have touted the cloud as a proof point of AI-driven revenue on past earnings calls, but the most recent quarter suggested newfound confidence in messaging around growth from other parts of the business, like the search engine, that have been bolstered by AI integrations.
Google’s Gemini AI assistant app now has more than 750 million users per month, Pichai said, up by 100 million compared with November.
Daily queries in AI Mode, a chatbot-like feature in its native search engine, have also doubled since launch.
Gemini has helped the advertising unit to deliver ads on long, complex search queries that were previously difficult to monetise, Google’s chief business officer, Philipp Schindler, told analysts.
The company reported total revenue of US$113.83bil for the 4Q25, beating analyst estimates of US$111.43bil, per LSEG data. Adjusted profit per share of US$2.82 also beat estimates of US$2.63. — Reuters
