TL;DR

Google plans capital expenditure of $175-185 billion in 2026—nearly double the $91.4 billion spent in 2025 and far exceeding analyst expectations of $120 billion. Strong advertising and cloud growth underpin the AI investment, with cloud revenues up 48% and annual revenue surpassing $400 billion for the first time.

The Numbers Behind the Bet

Fourth-quarter capital investment nearly doubled to $27.9 billion compared with the year before. Annual revenue rose 18% to $113.8 billion in Q4, with net income increasing 30% to $34.5 billion—beating analyst expectations of $31.9 billion.

The core search and advertising business grew 17% year-on-year to $63.1 billion in quarterly revenue, helping to counter fears that AI chatbots from rivals including OpenAI’s ChatGPT and Elon Musk’s Grok are taking users.

Cloud revenues jumped 48% to $17.7 billion against expectations of $16.3 billion. Google’s backlog of cloud contracts reached $240 billion by December—55% more than in September. CEO Sundar Pichai noted that “the number of deals in 2025 over $1 billion surpassed the previous three years combined.”

Investor Reaction: Eye-Watering but Supported

Google stock initially fell more than 7% in after-hours trading as investors digested the capex numbers, but recovered to trade down about 1.5%. The reaction echoed Microsoft’s experience last week, when shares fell more than 10% after disclosing capex exceeding $140 billion for this year.

The key difference: Google’s free cash flow grew to $24.5 billion in Q4—up from $14.3 billion in the final period of 2024—totalling $73.3 billion for the year. Pichai argued the AI investments are supported by earnings and cash flow growth.

Gemini Gains Ground

The Gemini App now has 750 million monthly users, up 100 million from the previous quarter. However, this still trails OpenAI, which claims more than 850 million weekly ChatGPT users.

Pichai said he “hasn’t seen any evidence of cannibalisation” of ad revenues from AI features in Search, noting that AI has expanded Google’s ability to deliver ads on “longer and more complex searches.”

Looking Forward

Pichai expects demand from DeepMind and cloud customers to continue outstripping new computing capacity, even with the massive infrastructure investment. The commitment positions Google for sustained AI capability growth, though the spending levels will continue drawing scrutiny as the industry watches for returns on these unprecedented investments.