Alphabet just beat estimates and then raised its hand for the AI arms race. Revenue jumped ~18% to $113.8B, net income climbed ~30% to $34.5B, and management told investors it’s ready to spend like a war chest in 2026.
AI finds religion: Alphabet says the 2026 capex range is $175-$185B, nearly double last year. That’s mostly for AI compute and cloud infrastructure. Here are the wild bits:
Why it matters: Alphabet isn’t dabbling. This is full-throttle infrastructure spending to serve AI models and massive cloud demand. Cloud growth and a healthy backlog mean customers are committing, but those commitments require enormous compute and data centers - hence the capex spike.
The good: revenue and profits are solid, Cloud is ripping, and Gemini’s user growth + cost cuts are real operational wins. The bad: YouTube ads missed expectations, ad growth is lapping a strong 2024 election, and Other Bets lost more - Waymo’s $2.1B stock-comp charge didn’t help.
Short term, investors blinked: stock slid after-hours. Long term, this is a bet on scale - spend now to avoid getting left behind in model training and cloud services. The risk is obvious: billions in sunk costs with payoff dependent on continued AI demand and ad-market stability. If AI margins hold and cloud deals convert, Alphabet could justify the spend. If the AI gold rush cools, that $185B number will look expensive fast.
Bottom line: Alphabet’s earning power is solid, but 2026 will be the year they put chips on the table - and the table is gigantic.
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