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Alphabet (GOOGL, GOOG) stock fell as much as 5% early Thursday as the tech giant’s spending plans blew past forecasts, leaving investors questioning the scale and sustainability of Big Tech’s investment plans to win the AI race.
In its fourth quarter earnings report, the Google parent company said its 2026 capital expenditures would land in a range of $175 billion-$185 billion, roughly double the $91.4 billion the company invested in 2025. Wall Street analysts had expected the company to spend closer to $120 billion this year.
Investors have grown concerned in recent weeks about how the billions of dollars in AI investments that Big Tech hyperscalers will pay off, with the industry’s biggest players — which also include Microsoft (MSFT), Meta (META), and Amazon (AMZN) — now expected to spend some $500 billion on AI investments this year.
Alphabet CFO Anat Ashkenazi said on a call with analysts following the company’s earnings release that the higher 2026 spending would go toward AI computing infrastructure as the company looks to develop frontier AI models and meet demand for its Cloud and Services segments.
“The investments that we’ve made in AI — it’s already delivering results across the business,” said Ashkenazi. The executive pointed to growth in Google Cloud driven by demand for its AI products. The segment saw fourth quarter revenue spike 48% from the previous year to $17.7 billion, more than the $16.2 billion expected by analysts.
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Ashkenazi said Alphabet will make its 2026 investments “in a way that maintains a very healthy financial position for the organization.”
Overall, the company’s fourth quarter financial results beat Wall Street’s estimates on the top and bottom lines. Fourth quarter revenue climbed 18% to $113.8 billion from the year-ago period, ahead of the $111.4 billion expected by analysts. The tech giant’s earnings per share rose to $2.82 from $2.15 in the previous year, also higher than the $2.65 projected.
Google Services — the segment including ad revenue from Search and YouTube, which accounts for the majority of Alphabet’s revenue — saw revenue climb a more modest 14% from the previous year to $95.9 billion, higher than the projected $94.9 billion, per Bloomberg consensus estimates. Alphabet CEO Sundar Pichai on the post-earnings conference call pointed to AI driving Search revenue as users engage with Google’s tool, AI mode.
Alphabet stock had soared more than 20% since its last earnings report showed the tech giant beginning to benefit from a slew of AI deals with Meta, Anthropic (ANTH.PVT), and OpenAI (OPAI.PVT) involving its Cloud segment. At the same time, the broader “Magnificent Seven” group of Big Tech stocks has been collectively down nearly 5% over that period, led by a 23% drop in Microsoft (MSFT) shares.
