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Google said it plans to double its capital expenditure this year to as much as $185bn as strong growth in its advertising and cloud businesses added to the search giant’s financial firepower for its huge bet on AI.
The Mountain View, California-based group increased its forecast for capex in 2026 to a range of $175bn to $185bn, far exceeding analysts’ expectations of about $120bn, Google’s parent company Alphabet said on Wednesday.
Fourth-quarter capital investment almost doubled to $27.9bn compared with the year before, pushing spending in 2025 to $91.4bn.
Google has gained momentum in the AI race in recent months with the launch of new Gemini models, using its vast income and advanced in-house chips to recover ground against rivals including OpenAI.
Chief executive Sundar Pichai has argued that its huge AI investments were supported by big jumps in earnings and cash flow, as its advertising revenue continues to climb and AI demand lifted its cloud computing arm.
“Our capex spend this year is an eye towards the future,” said chief executive Sundar Pichai. “The demand we are seeing across the board for our services — and what we need to invest in Google DeepMind and in cloud — is exceptionally strong.”
Pichai said that despite the big investment in data centres and its own custom AI chips, known as TPUs, he still expects demand from its DeepMind research lab and from customers to outstrip the new computing power it can bring online.
Google stock initially fell more than 7 per cent in after-hours trading as investors digested the eye-watering capex numbers, but recovered to trade down about 1.5 per cent.
Investors have been sensitive to trends in AI spending, with fears spreading about a bubble developing in public and private markets as revenues lag far behind the cash being pumped into the technology.
When Microsoft also disclosed a big jump in capex last week — now set to exceed $140bn this year — its shares fell more than 10 per cent. By contrast, Meta rose even as it forecast annual capex of $135bn because the social media giant was able to show that AI was improving advertising efficacy.
Google’s net income increased 30 per cent to $34.5bn in the fourth quarter from the previous year, beating analysts’ expectations of $31.9bn compiled by FactSet. Alphabet made $132bn of profit in 2025.
Revenue rose 18 per cent to $113.8bn, beating the average estimate of $111.3bn. Annual sales surpassed $400bn for the first time.
Its core search and advertising business grew 17 per cent year-on-year in the quarter to bring in $63.1bn in revenue, beating estimates of $61.3bn, helping to quell fears that AI chatbots from rivals including OpenAI’s ChatGPT and Elon Musk’s Grok are poaching users.
Pichai said that he “hasn’t seen any evidence of cannibalisation” of ad revenues as Google augments its traditional search results with “AI mode” and “overview” answers, nor from the launch of its Gemini chatbot.
Chief business officer Philipp Schindler said that AI had added to its understanding of users’ intent, which “has significantly expanded our ability to deliver ads on longer and more complex searches” that advertisers are willing to pay more for.
Cloud revenues rose 48 per cent to $17.7bn against expectations of $16.3bn, as demand for computing power to train and run AI models increases. Jefferies analyst Brent Thill said that the acceleration in cloud earnings “speaks to momentum in AI, Gemini and the core businesses”.
Pichai said that Google’s backlog of cloud contracts had increased to $240bn by the end of December, 55 per cent more than in September.
“The number of deals in 2025 over $1bn surpassed the previous three years combined,” he added.
Investors also took comfort from Google’s free cash flow, which grew to $24.5bn in the quarter — up from $14.3bn in the final period of 2024 — and totalled $73.3bn for the year.
Alphabet shares have rallied 61 per cent in the past 12 months, pushing its market cap past $4tn to surpass Microsoft as the world’s third-largest company.
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Pichai also pointed to growth in the Gemini App, its main consumer AI product, which now has 750mn monthly users, 100mn more than in the previous quarter. However, this still trails market leader OpenAI, which claims more than 850mn people use ChatGPT weekly.
Google faced a volatile market this week as software stocks sold off heavily. The market reacted to new coding tools, in particular those from AI start-up Anthropic, which have shown they can autonomously build programs to automate legal work and back-office tasks in a matter of hours.