Google parent raises 2026 AI spending to $205B
What's the story
Google's parent company, Alphabet, has announced a major increase in its capital expenditure plans for 2026. The tech giant now plans to spend between $195 billion and $205 billion, up from the previous estimate of $180 billion-$190 billion. The hike comes as part of Alphabet's strategy to ramp up investment in the computing infrastructure required for its artificial intelligence (AI) ambitions.
Expenditure rationale
Increased spending due to faster capacity expansion
During an earnings call on July 22, Alphabet's CFO, Anat Ashkenazi, explained the rationale behind the increased spending.
She said it was mainly due to faster capacity expansion to meet growing demand.
"We have increased our capacity quite significantly over the past three years. The demand still outpaces that investment," Ashkenazi said during the call.
Cloud success
Record growth in Google Cloud revenue
The increased spending comes on the heels of another stellar quarter for Google Cloud.
The division's revenue soared 82% year-on-year to $24.8 billion in Q2 2026, its fastest growth since Alphabet started breaking out Cloud results in 2020.
Operating income also tripled year-on-year to $8.8 billion, driven by "strong demand for AI infrastructure and AI solutions," according to Alphabet CEO Sundar Pichai.
Business growth
Cloud backlog rises to $514 billion
Google Cloud has become one of Alphabet's fastest-growing businesses, contributing a larger portion of the company's revenue and profits in recent quarters.
The division's backlog, a measure of future revenue from signed cloud contracts, increased to $514 billion from $460 billion in the previous quarter.
Despite being the third-largest cloud provider by market share, it is the fastest-growing major hyperscaler by revenue growth, outpacing Amazon Web Services (AWS) and Microsoft Azure.
Financial performance
Stellar growth in Alphabet's advertising business
Google's advertising revenue for the quarter stood at $81.6 billion, a 14.4% increase from the same period last year.
YouTube ads rose to $11.06 billion, up 12.9% year-on-year while subscriptions, platforms, and devices unit saw a 15.3% jump to $12.9 billion.
Alphabet's consolidated revenue grew by 24% to $119.8 billion with net income soaring three-fold to a record $112.1 billion, aided by $98 billion in paper gains from equity investments like SpaceX and Anthropic during the quarter alone.