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Google said it plans to double its capital expenditure this year to as much as $185bn as it intensifies its huge bet on AI, armed with greater financial firepower after reporting record quarterly earnings.
The search giant increased its forecast for capex in 2026 to a range of $175bn to $185bn, far exceeding analysts’ expectations of about $120bn, Google’s parent company Alphabet said on Wednesday.
Fourth-quarter capex almost doubled to $27.9bn compared with the year before, pushing spending in 2025 to $91.4bn.
Google’s huge AI investments were supported by big jumps in earnings and cash flow, as its advertising revenue continues to climb and AI demand lifted its cloud computing arm.
Net income increased 30 per cent to $34.5bn in the fourth quarter from the previous year, beating analysts’ expectations of $31.9bn compiled by FactSet. Alphabet made $132bn of profit in 2025.
Revenue rose 18 per cent to $113.8bn, beating the average estimate of $111.3bn. Annual sales surpassed $400bn for the first time.
“Our capex spend this year is an eye towards the future,” said chief executive Sundar Pichai. “The demand we are seeing across the board for our services — what we need to invest in Google DeepMind and in cloud — is exceptionally strong.”
Pichai added that despite the big investment in data centres and its own custom AI chips, known as TPUs, he still expects demand from its DeepMind research lab and from customers to outstrip the new computing power it can bring online.
Google’s core search and advertising business grew 17 per cent year-on-year in the quarter to $63.1bn, beating estimates of $61.3bn, helping to quell fears that AI chatbots from rivals including OpenAI’s ChatGPT and Elon Musk’s Grok are poaching users. YouTube ads rose 9 per cent to $11.4bn.
Cloud revenues rose 48 per cent to $17.7bn against expectations of $16.3bn, as demand for computing power to train and run AI models increases.
Pichai said that Google’s backlog of cloud contracts had increased to $240bn by the end of December, 55 per cent more than in September.
“We are winning more new customers faster,” Pichai said. “We are also signing larger customer commitments. The number of deals in 2025 over $1bn surpassed the previous three years combined.”
Free cash flow was $24.5bn in the quarter — up from $14.3bn in the final period of 2024 — and totalled $73.3bn for the year.
Alphabet shares have rallied 61 per cent in the past 12 months, pushing its market cap past $4tn to surpass Microsoft as the world’s third-largest company.
The stock initially fell more than 7 per cent in after-hours trading as investors digested the eye-watering capex numbers, but recovered to trade down about 2 per cent.
Pichai added that the Gemini App, its main consumer AI product, has 750mn monthly users, up from 650mn in the previous quarter. However, this still trails market leader OpenAI, which claims more than 850mn people use ChatGPT weekly.
Still, Google has won plaudits for improving its Gemini models and products to catch up with OpenAI, after being criticised for allowing the much smaller start-up to be quicker to market with its chatbot in 2022.
Investors have been sensitive to any increase in AI capex, with fears spreading about a bubble developing in public and private markets as AI revenues lag far behind the cash being pumped into the sector.
When Microsoft also disclosed a big jump in AI spending last week — with capex set to exceed $140bn this year — its shares fell more than 10 per cent. By contrast, Meta rose after it said its capex could double $135bn this year as the social media giant was able to show that AI was improving advertising efficacy.
Software stocks have sold off heavily this week as the market reacted to new coding tools, in particular those from AI start-up Anthropic, which have shown they can autonomously build programs to automate legal work and back-office tasks in a matter of hours.
