Alphabet increases 2026 capex to $190 Billion, signals a further increase in 2027

Alphabet reported first-quarter earnings that beat revenue expectations, driven largely by strong growth in its cloud business. The company’s shares rose following the announcement.

Adjusted earnings per share came in at $2.62, just below analysts’ expectations of $2.63, while revenue reached $109.9 billion, exceeding the projected $107.2 billion.

Wall Street was also watching several other numbers in the report:

Google Cloud: $20.03 billion vs. $18.05 billion estimated, according to StreetAccount

YouTube advertising: $9.88 billion vs. $9.99 billion estimated, according to StreetAccount

Traffic acquisition costs: $15.23 billion vs. $15.3 billion estimated, according to StreetAccount

Overall, Alphabet’s revenue grew 20% year over year, marking its fastest quarterly growth since 2022.

“Our enterprise AI solutions have become our primary growth driver for cloud for the first time in Q1,” CEO Sundar Pichai told analysts on the earnings call. He also noted that paid monthly active users of Gemini Enterprise increased 40% quarter over quarter.

The company raised its 2026 capital expenditure guidance range to $180 billion to $190 billion, up from its earlier estimate of $175 billion to $185 billion, and signaled a further increase in 2027. Alphabet also continues to invest heavily in infrastructure, including servers and data centers, and recently moved to acquire Intersect, a data center firm.

Chief Financial Officer Anat Ashkenazi said capital spending will rise significantly in 2027 compared to 2026. In Q1 alone, Alphabet spent $35.7 billion on capital expenditures that includes real estate, servers, data centers and other infrastructure. Alphabet is pouring money into AI infrastructure to capitalize on exploding demand.

 “We are compute constrained in the near term,” Pichai said on the earnings call. “Our cloud revenue would have been higher if we were able to meet the demand.”

Alphabet’s stock has outperformed its “Magnificent Seven” peers this month, gaining 21%, as broader tech stocks rally. Investors have remained bullish despite concerns about rising infrastructure costs linked to supply chain disruptions and geopolitical tensions.

Net income for Q1 2026 reached $62.58 billion, or $5.11 per share, up 81% from a year earlier. However, the results included a $37 billion gain from equity securities, which was not included into analyst expectations. Excluding that gain, earnings per share came in slightly below forecasts.

Google Cloud revenue surged 63% year over year, driven by enterprise AI solutions and infrastructure demand, with a reported backlog of $460 billion.

Search also performed strongly, with AI-driven features boosting usage and helping deliver 19% revenue growth.

Advertising revenue totaled $77.25 billion, up 15.5% year over year. However, YouTube ad revenue missed expectations, even as subscription growth outpaced advertising, according to Chief Business Officer Philipp Schindler.

Alphabet’s “Other Bets” segment, which includes Waymo, reported $411 million in revenue, down from $450 million a year earlier. Waymo surpassed 500,000 fully autonomous rides per week during the quarter.

The company also raised $16 billion in a recent funding round, valuing it at $126 billion, and is expanding its autonomous vehicle operations across several U.S. cities, with plans for further commercial launches later this year.