The latest
Alphabet raised the upper end of its 2026 capital spending forecast to $205 billion from a previous projection of $190 billion, accelerating the construction of data centers and computing capacity for artificial intelligence. The increase revived Wall Street concerns about financial discipline in a race whose ultimate cost and returns remain unclear.
The results also showed that some investments are beginning to generate revenue. Google Cloud delivered $24.77 billion in second-quarter sales, beating estimates, while its backlog of contracted business not yet recorded as revenue climbed to $514 billion.
But the broader picture remained mixed. Search advertising revenue narrowly missed expectations, and Gemini’s monthly active users declined from the first quarter despite reaching 950 million. Delays to Gemini 3.5 Pro have also raised questions about Google’s ability to compete with Anthropic and OpenAI in AI coding tools.
Details
- Combined spending: Alphabet, Microsoft, Amazon and Meta had indicated that their AI investments could total as much as $725 billion this year.
- Cloud demand: Sundar Pichai said Google Cloud’s growth was being driven by demand for AI infrastructure and solutions.
- Future revenue: Google expects to recognize more than half of its cloud backlog as revenue over the next 24 months.
- Faster releases: The company plans to approach a monthly model-release schedule after the launch of Gemini 4.
- YouTube: The platform generated $11.1 billion in revenue, exceeding analysts’ estimates.
- Second quarter: Capital expenditure reached $44.92 billion, while sales excluding partner payouts totaled $103.6 billion.
Between the lines
Alphabet has the demand and contracts to justify part of the spending, but it must build computing capacity before collecting most of the revenue. Investors are therefore questioning not whether growth exists, but how long it will take for returns to exceed the rising infrastructure costs.
What to watch
Results from Meta, Microsoft and Amazon will show whether combined Big Tech spending exceeds the projected $725 billion. Google Cloud’s growth and Gemini 4’s ability to strengthen search and coding will remain the clearest tests of Alphabet’s AI bet.
