Google Raises Capex Forecast After Cloud Delivers Record Growth
Synopsis
Alphabet has raised its 2026 capital expenditure forecast to between $195 billion and $205 billion after Google Cloud delivered record quarterly growth, highlighting the company's accelerating investment in AI infrastructure despite investor concerns over AI model delays.
Key Highlights
- Alphabet updated its 2026 capital expenditure outlook to US$195bn - US$205bn.
- Google Cloud Q2 revenue recorded $24.8B, up 82% in the second quarter.
- The company reported record cloud growth but fell short of adjusted earnings estimates.
Tech giant Alphabet raised its capital expenditure forecast for 2026 to US$195 billion-US$205 billion, from the previous target of US$180 billion-US$190 billion after an 82% year-on-year surge in Google Cloud revenue to US$24.8 billion in Q2.
Demand for AI cloud services still outpaces the investment in infrastructure by the company, it said.
Cloud Growth Beats Expectations
Alphabet also beat the consensus for a 64% rise in Google Cloud revenue, reporting an 82% increase to US$24.8 billion, according to LSEG data. The contribution was US$81.6B for advertising revenue ahead of the US$81.1B forecast.
Total revenue for the quarter came to US$119.8 billion, ahead of analysts’ forecast ofUS$116.9 billion. But adjusted earnings were US$2.85 per share versus Wall Street expectations of US$2.89 per share. The company also reported negative free cash flow of US$5.9 billion, for the first time in history.
Capex Increased Again
Alphabet now expects its capital expenditure between $195 billion and $205 billion in 2026, finance chief Anat Ashkenazi said.
Demand remained stronger than the company’s anticipated pace of expanding capacity while faster-than-expected deliveries of its infrastructure also pushed up the spending outlook, she said. A second major boost to capital expenditure in 2027 was also reaffirmed by Ashkenazi.
Gemini Delay Remains in Focus
Alphabet is in continuing hot water over delays to its Gemini 3.5 Pro AI model. On the earnings call, Google CEO Sundar Pichai said Google remains at the frontier in many areas, but coding and agentic coding were areas that need to level up. The company is still testing Gemini 3.5 Pro, while also training Gemini 4, he said.
Google also reported that for the first time in Q2, it saw revenue from direct sales of its TPU chips, although the bulk of revenue from related agreements is expected to come in next year.
Source: Reuters
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