Alphabet Raises AI Spending to $205 Billion Amid Cloud Surge

Alphabet Inc. increased its 2026 capital expenditure guidance to as much as $205 billion, up from an initial outlook of $180 billion to $190 billion. This spending surge focuses on servers, GPUs, CPUs, and data center construction to meet massive unmet demand for artificial intelligence. The company reported that capital expenditures in 2027 will be significantly higher than in 2026.

This investment follows a period of rapid growth for Google Cloud, which saw revenue increase 82% year over year to $25 billion in the second quarter of 2026. The division currently holds a $514 billion backlog of multiyear enterprise commitments, with approximately 90% of the Fortune 100 now utilizing the Gemini Enterprise model. To fund this expansion, Alphabet has assumed more than $114 billion in debt since the start of 2025. The aggressive outlay led the company to report negative free cash flow for the first time since its public offering.

CEO Sundar Pichai defended the spending, noting that AI Overviews now reach over 2.5 billion monthly users and that the AI business offers extraordinary returns. Alphabet also plans to drive further growth by selling its custom Tensor Processing Units, developed with Broadcom Inc., to external customers. Despite negative market reactions to the spending, the company maintains over $242 billion in liquidity.