Alphabet (GOOGL, GOOG) shares fell as much as 5% early Thursday as the tech giant’s spending plans came in much higher than expected and investors questioned the scale and sustainability of Big Tech’s investment plans to win the AI race.
Google’s parent company said in its fourth quarter earnings call that capital spending in 2026 will be in the range of $175 billion to $185 billion, roughly double the $91.4 billion the company invested in 2025. Wall Street analysts had expected the company to invest nearly $120 billion this year.
Investors have grown increasingly concerned in recent weeks about how the multibillion-dollar AI investments by Big Tech hyperscalers will be recouped, with the industry’s biggest players, which also include Microsoft (MSFT), Meta (META), and Amazon (AMZN), expected to spend about $500 billion in AI investments this year.
Anat Ashkenazi, Alphabet’s chief financial officer, said on a conference call with analysts after the company’s earnings release that the increased spending in 2026 will go toward AI computing infrastructure as the company develops cutting-edge AI models and seeks to meet the demands of the cloud and services sector.
“The investments we have made in AI are already delivering results across the business,” Ashkenazi said. The executive noted that demand for AI products is driving Google Cloud’s growth. The division’s fourth-quarter sales rose 48% from a year earlier to $17.7 billion, beating analysts’ expectations of $16.2 billion.
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Ashkenazi said Alphabet will make its 2026 investments “in a way that maintains the very strong financial health of the organization.”
Overall, the company’s fourth quarter results beat Wall Street expectations for both revenue and bottom line. Fourth-quarter sales rose 18% from a year earlier to $113.8 billion, beating analysts’ expectations of $111.4 billion. The tech giant’s earnings per share rose to $2.82 from $2.15 a year earlier, also beating expectations of $2.65.
Revenue from Google Services, the division that makes up the bulk of Alphabet’s revenue and includes ad revenue from search and YouTube, rose slightly by 14% year over year to $95.9 billion, beating expectations of $94.9 billion, according to Bloomberg consensus estimates. Alphabet CEO Sundar Pichai pointed out in a post-earnings conference call that AI will drive search revenue when users take advantage of Google’s tool, AI Mode.
Alphabet’s stock price has soared more than 20% since its last earnings report showed the tech giant was starting to benefit from a number of AI deals with Meta, Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT), all of which are involved in the cloud sector. At the same time, the broader “Magnificent Seven” group of Big Tech stocks collectively fell nearly 5% over the period, led by a 23% decline in Microsoft (MSFT) stock.
