Alphabet (GOOGL, GOOG) shares fell as much as 7% in after-hours trading Wednesday before recovering some of those losses after the tech giant issued a 2026 capital spending forecast that far exceeded Wall Street expectations.
In its fourth-quarter earnings report, Google’s parent company said it expects capital expenditures to reach about $180 billion in 2026 at the midpoint of its forecast. That compares with the $119.5 billion analysts were expecting, according to Bloomberg. The figure would nearly double Alphabet’s $91 billion in capital spending in 2025, much of which the company said went toward servers and data center infrastructure to support artificial intelligence.
Investors have grown increasingly cautious about whether the massive AI investments being made by Big Tech companies will ultimately pay off. Alphabet shares trimmed their losses and were down a little more than 2% later Wednesday evening.
Chief Financial Officer Anat Ashkenazi told analysts on the company’s earnings call that the higher spending planned for 2026 will be focused on AI computing infrastructure as Alphabet works to develop advanced AI models and meet growing demand across its Cloud and Services businesses.
“The investments we’ve made in AI are already delivering results across the business,” Ashkenazi said, pointing to strong growth in Google Cloud driven by demand for AI products. Cloud revenue jumped 48% year over year in the fourth quarter to $17.7 billion, well above the $16.2 billion analysts had expected.
Ashkenazi added that Alphabet plans to make its 2026 investments while maintaining “a very healthy financial position” for the company.
Overall, Alphabet’s fourth-quarter results topped Wall Street expectations on both revenue and earnings. Revenue rose 18% from a year earlier to $113.8 billion, beating the $111.4 billion consensus estimate. Earnings per share increased to $2.82, up from $2.15 a year ago and above the $2.65 analysts had projected.
Google Services, which includes advertising revenue from Search and YouTube and accounts for most of Alphabet’s total sales, reported revenue growth of 14% year over year to $95.9 billion, exceeding the $94.9 billion forecast. On the earnings call, CEO Sundar Pichai said AI is helping drive Search revenue as users engage more with Google’s AI Mode.
Alphabet shares had climbed more than 20% since the company’s previous earnings report, which highlighted growing benefits from AI-related deals in its Cloud business with companies such as Meta, Anthropic, and OpenAI. Over the same period, the broader group of Big Tech stocks known as the “Magnificent Seven” has fallen nearly 5%, led by a roughly 23% decline in Microsoft shares.
The launch of Google’s Gemini 3 AI model, which outperformed rival systems on key benchmarks and prompted OpenAI to declare a “code red,” along with the announcement of a landmark deal with Apple, further strengthened Alphabet’s standing as a leader in AI and helped lift the stock.
“The launch of Gemini 3 was a major milestone and we have great momentum,” Pichai said, noting that the Gemini app now has more than 750 million monthly active users.
RBC Capital Markets analyst Brad Erickson said in a note to clients that the strong momentum in the Gemini app and the sharp increase in Google Cloud revenue in the fourth quarter provide “plenty of proof points” to justify Alphabet’s higher level of spending in 2026.