Economy

Alphabet increases capital spending forecast for 2026 following fourth-quarter earnings beat

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Feb 5, 2026

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Alphabet reported fourth-quarter revenue of $113.83 billion on Thursday, surpassing analyst expectations of $111.43 billion. Despite the earnings beat, the company's shares fell approximately 5% in premarket trading after it announced plans to significantly increase capital expenditures. Alphabet projected 2026 spending to range between $175 billion and $185 billion, more than doubling its capital output from 2025.

The company stated that a major portion of this increased budget is designated for investing in artificial intelligence compute capacity for its Google DeepMind division. While overall revenue exceeded estimates, performance across specific sectors was mixed. Google Cloud revenue reached $17.66 billion, beating the anticipated $16.18 billion. However, YouTube advertising revenue came in at $11.38 billion, missing the $11.84 billion forecast.

Market analysts offered varied reactions to the spending announcement. Deutsche Bank analysts noted that the spending plan "stunned the world," expressing uncertainty about the long-term outcome. Barclays analysts observed that costs related to infrastructure, DeepMind, and the Waymo autonomous driving unit have weighed on profitability, though they described the growth in the Cloud division as "astonishing."

The earnings report follows an active period for the company, which recently launched its Gemini 3 AI models and acquired data center company Intersect for $4.75 billion. Alphabet’s Waymo unit also recently secured a $16 billion funding round after serving 15 million trips in 2025. Additionally, the company is currently appealing a federal judge's ruling regarding its position in the internet search market.

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• Market concern over massive spending increases Despite beating revenue expectations, Alphabet's shares fell approximately 5% in premarket trading following the announcement that capital expenditures for 2026 are projected to more than double from 2025 levels, ranging between $175 billion and $185 billion. Deutsche Bank analysts remarked that this spending plan "stunned the world," expressing uncertainty regarding the long-term outcome of such a significant financial outlay.

• Profitability pressures and missed targets While overall revenue was strong, specific sectors underperformed; notably, YouTube advertising revenue came in at $11.38 billion, missing the forecast of $11.84 billion. Furthermore, Barclays analysts observed that heavy costs associated with infrastructure, the DeepMind division, and the Waymo autonomous driving unit have begun to weigh on the company's overall profitability.

• Ongoing legal and regulatory challenges Alongside financial hurdles, the company continues to face significant regulatory scrutiny. Alphabet is currently in the process of appealing a federal judge's ruling concerning its position in the internet search market, adding a layer of legal uncertainty to its operational outlook.

How it may affect me

As a U.S. reader:

• You may observe accelerated development in consumer artificial intelligence tools as the company plans to double its capital spending to over $175 billion specifically to boost compute capacity for Google DeepMind.

• Access to autonomous ride-hailing services may expand or continue as the Waymo unit recently secured $16 billion in funding after completing 15 million trips in 2025.

• Investors with portfolios containing technology stocks or index funds may see short-term volatility following the 5% drop in Alphabet shares caused by analyst concerns over the massive spending forecast.

• The landscape of internet search tools faces potential future changes as the company appeals a federal judge's ruling regarding its dominant position in the search market.

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