Google beats expectations across the board in its earnings report, but capital expenditures double to as high as $205 billion; the stock is unimpressed

Alphabet CFO Anat Ashkenazi said at the company’s Q2 earnings call that it has raised its full-year 2026 capital expenditure guidance to $195 billion to $205 billion, more than double 2025’s spending; Q2 capital expenditures reached $44.92 billion, ahead of expectations, with most of the spending going toward technical AI infrastructure. She also signaled that 2027 spending will continue to rise significantly.
(Background: Tonight’s AI money-burning exam ends: Alphabet takes a stance on $190 billion capex, and Tesla faces huge volatility)
(Additional context: AI is an electricity-eating monster! Bloomberg: By 2035, U.S. data centers’ power use will be 4 times higher, accounting for 20% of the nation’s total power generation)

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• Capex guidance boosted again after two months
• Earnings beat expectations—why the stock is still falling
• A game where all the big players are piling on bets

Google parent Alphabet delivered its Q2 results on Wednesday. The financials beat across the board, but the stock fell sharply in after-hours trading. At the earnings call, CFO Anat Ashkenazi presented two sets of numbers: one set that satisfied Wall Street, and another that made investors frown—namely, an ever-increasing capital expenditure outlook.

Capex guidance boosted again after two months

Ashkenazi said at the call that Alphabet has revised its full-year 2026 capital expenditure guidance up to $195 billion to $205 billion. The company expects the money to be used to build data centers, buy chip servers, and other long-term investments—“spending first to build capacity.” The payoff will only be visible years down the line.

This figure is higher than the “up to $190 billion” the company gave itself in April, and also higher than analysts’ original estimate of about $186 billion.

Looking at the earlier base for comparison: this new 2026 guidance is more than double 2025’s spending. And even just in Q2, Alphabet’s capital expenditures reached $44.92 billion—nearly double the $22.4 billion from the same period last year—also slightly above analysts’ expected $44.15 billion.

More importantly, Ashkenazi did not lock the message down for 2026. She reiterated that 2027 spending will still be “significantly” higher, for a very direct reason: the company needs to keep building data centers and securing compute resources in order to keep up with the appetite of its AI projects and models. This is essentially telling the market that this round of spending increases is not a one-off event, but a long uphill stretch with no clear end in sight.

Earnings beat expectations—why the stock is still falling

If you look only at revenue, Alphabet actually turned in a strong performance this quarter. Total revenue in Q2 was $119.8B, up 24% year over year, beating market expectations.

The real growth engine is Google Cloud: revenue grew 82% year over year to about $24.8 billion, driven by enterprises’ continued growing demand for AI compute; and Cloud’s backlog of orders—signed contracts not yet recognized as revenue—had already surpassed $460B in the prior quarter.

In theory, such a report should lift the stock. But GOOGL fell after the earnings release, and the market’s anxiety is straightforward: if the growth rate of capital expenditures keeps running ahead of revenue growth over the long term, when will this money actually convert into profits? Spending to build capacity is one thing; whether that capacity can be fully utilized and turned into results is another. Fa

A game where all the big players are piling on bets

Alphabet is not the only giant increasing its stakes. If you sum the 2026 capital expenditure guidance for the four mega players—Google, Amazon, Microsoft, and Meta—the total comes to about $725 billion, up from about $410 billion in 2025, a jump of roughly 77%.

Of that, Amazon is about $200 billion, Microsoft is nearly $190 billion, and Meta is about $125 billion to $145 billion. After this latest raise, Alphabet is already nearly at the scale of the top tier. Research firm CreditSights estimates that about 75%—around $450 billion—of this pot of money will go directly to AI infrastructure: GPUs, servers, networks, and data centers.

The rules of this game are simple: whoever builds capacity first earns the right to take the next round of orders; but if you build too fast and too much, capital expenditures on the books will run ahead of revenue growth, gradually draining the stock’s patience.