San Francisco, Feb 5, 2026, 07:24 (PST)
- Alphabet signaled it could spend as much as $185 billion on capital expenditures by 2026, sending its shares down 3% following the earnings report.
- CEO Sundar Pichai revealed the Gemini app reached over 750 million monthly active users during the December quarter.
- Analysts caution that Big Tech’s AI push is making investors insist on clearer returns.
Alphabet’s stock dropped 3% after the Google parent revealed plans to spend up to $185 billion this year. That’s a steep jump, putting its AI spending spree back in the spotlight despite strong growth in major AI products. Reuters (Reuters)
This surge is crucial since investors no longer see AI as a distant gamble but as a necessary expense that must deliver results. Major tech companies are funneling billions into data centers and chip development, while markets grow impatient with empty assurances. (Reuters)
Bernstein analyst Mark Shmulik didn’t mince words: combined investment by mega-cap firms in 2026 is heading “quickly to north of a trillion dollars” once you factor in capital spending and related hiring. For that level of spending to pay off, he stressed the “total addressable market” — the potential customer base — must expand rapidly. (Reuters)
On the first earnings call following the launch of its Gemini 3 model, Alphabet’s top brass doubled down on the narrative of AI delivering results. “Our AI investments and infrastructure are clearly fueling revenue and growth across the company,” CEO Sundar Pichai remarked. (Reuters)
Pichai revealed that the Google Gemini app, a rival to OpenAI’s ChatGPT, closed the December quarter with over 750 million monthly active users, up from 650 million the previous quarter. He added that user engagement increased following the launch of Gemini 3, and the enterprise version of Gemini secured 8 million paying licenses. (Reuters)
Comparing user numbers is tricky since companies use different metrics. OpenAI CEO Sam Altman revealed in October that ChatGPT boasts over 800 million weekly active users, according to Reuters. (Reuters)
Alphabet’s latest quarter highlighted just how much revenue still flows from ads, fueling its AI push. The company’s fourth-quarter profit jumped 30% year-over-year to $34.5 billion, or $2.82 per share, with revenue up 18% to $113.8 billion, according to the Associated Press. Apnews (AP News)
Google Cloud’s revenue jumped 48% to $17.7 billion, AP reported. Digital ad sales hit $82.3 billion for the quarter, marking a 14% increase. Pichai told investors that “Search saw more usage than ever before, with AI continuing to drive an expansionary moment,” according to AP. (AP News)
What caught everyone off guard was the spending spike. Capital expenditure—capex, the funds poured into long-term assets like data centers and servers—hit $91 billion last year. This year, Alphabet projects a massive leap to between $175 billion and $185 billion, according to AP. The Financial Times highlighted this same plan, describing it as Google’s move to “double AI spending” following a strong earnings report. Ft (AP News)
Alphabet argues that the increased spending is driving real gains in product traction and cloud sales, not just flashy presentations. Yet, the capex number could steal the spotlight—it’s set to potentially more than double by 2025 and would surpass rivals like Microsoft, Meta, and Amazon, according to Reuters. (Reuters)
Investors are keeping an eye on the flip side of the AI frenzy: OpenAI’s fast pace of dealmaking and the financial pressure it brings. Paul Meeks from Freedom Capital Markets described Alphabet’s capex forecast as “eye-watering,” yet noted “the market is favoring Google versus OpenAI,” according to Reuters. (Reuters)
The story isn’t settled yet. If AI-driven revenue lags, rising costs for chips, power, and data centers could eat into margins. On top of that, the company faces legal challenges as the Justice Department and Google appeal a significant U.S. antitrust ruling related to its search business, AP reported. (AP News)
