That showed in the confident tone executives struck on the post-earnings call, the first since Alphabet released the Gemini 3 model. But its shares fell 3% on Wednesday after the company said it would spend up to $185 billion this year, deepening investor scrutiny as the expenditure potentially more than doubles from 2025 and eclipses rivals, Meta and Amazon.
“We’re quickly getting to north of a trillion dollars in combined 2026 investment across the mega caps if we consider both capital expenditure and associated resourcing needs,” Bernstein Analyst Mark Shmulik said.
“For that trillion to pay off suggests the total addressable market for AI-driven products and enhancements needs to be multiples of that very quickly.” For now, the AI spending is reaping returns, and its shares remain more than 80% higher in the past 12 months, even with Thursday’s decline.
Alphabet’s prepared remarks about AI in 2025 had focused on product usage and AI revenue generated specifically via its cloud-computing unit. Cloud unit revenue surged 48% in the December quarter. That came as Wall Street’s has sent a stark message to tech companies: Soaring AI spending can continue only if tech companies demonstrate commensurate financial returns.
“Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board,” Chief Executive Officer Sundar Pichai said.
–Reuters–
