Alphabet Pays SpaceX $920 Million Monthly for AI Compute

Alphabet Inc. began paying Space Exploration Technologies (SpaceX) $920 million per month in October 2026 for compute capacity at the Colossus data center. The 32-month agreement, signed in June, could reach a total value of $29 billion and allows either party to terminate the contract with 90 days' notice.

Alphabet is using the partnership as a temporary measure to manage extreme capacity constraints within its Google Cloud business. The company is simultaneously investing approximately $200 billion in annual capital expenditures to build its own internal data centers. CFO Anat Ashkenazi described the arrangement as a "bridging strategy while we build out more internal capacity."

SpaceX intends to grow its AI revenue through the expansion of new data centers. While SpaceX management expects a payback period of less than one year on new compute capital deployment, some analysts suggest the current high pricing is a result of market shortages rather than a long-term competitive advantage. Alphabet also maintains a significant stake in SpaceX, with a share lockup period extending into the third quarter of 2027.