Google expects 'significant increase' in capital expenditure in 2026, execs say

Alphabet Inc., the parent company of Google, is set to significantly ramp up its capital expenditures in 2026 as part of its ongoing commitment to enhancing AI infrastructure, according to statements made by executives on Wednesday. This announcement follows the company's record-breaking quarter, where it achieved $100 billion in revenue, surpassing Wall Street's expectations for the third quarter. In their latest earnings report, executives revealed that the company anticipates capital expenditures for 2025 to range between $91 billion and $93 billion, marking the second upward revision this year. In July, projections were adjusted from $75 billion to $85 billion, largely earmarked for the development of new data centers. Anat Ashkenazi, Alphabet's finance chief, indicated that the company is poised for an even greater increase in capital spending for 2026. "Looking ahead to 2026, we expect a significant increase in CapEx and will provide more detail during our fourth quarter earnings call," Ashkenazi stated. This move is reflective of a broader trend in the industry, as companies strive to bolster their infrastructure to meet soaring demand for AI capabilities. On the same day, Meta also raised its forecast for capital expenditures in 2025 by $4 billion, now estimating between $70 billion and $72 billion, up from a previous range of $66 billion to $72 billion. Google executives emphasized the urgency of scaling cloud services, which experienced an impressive 46% quarter-over-quarter growth in backlog during the third quarter. CEO Sundar Pichai remarked, "We continue to drive strong growth in new businesses," highlighting that Google Cloud ended the quarter with a backlog totaling $155 billion. Additionally, the company reported a 32% increase in cloud revenue year-over-year, keeping pace with its major competitors. Notably, Pichai and Ashkenazi mentioned that Google secured more $1 billion contracts in the last nine months than in the two previous years combined. This includes a significant $10 billion cloud contract from Meta over six years. In a separate deal, Anthropic announced access to approximately 1 million of Google's custom-designed Tensor Processing Units (TPUs), worth tens of billions, highlighting the company's commitment to expanding its AI capabilities. The infrastructure investments are also enhancing Google's own AI products, with the flagship app Gemini now boasting over 650 million monthly active users, a substantial increase from 450 million in the previous quarter. The search business demonstrated resilience, generating $56.56 billion in revenue—a 15% rise from the previous year—despite concerns that the competitive AI market might impact its core search and advertising functions. Furthermore, Google's AI Mode, integrated within its search engine, has attracted 75 million daily active users in the U.S., with search queries doubling over the last quarter. The company is also testing advertisements within this AI Mode, indicating a potential new revenue stream.