Alphabet's capital expenditure (CapEx) is increasing significantly, with sources describing it as a 'spending spree' or 'CapEx panic' as the company invests heavily in artificial intelligence (AI). The company's stock price fell more than 6% following the announcement, driven by expectations of continued high spending.
Alphabet reported Q2 2026 earnings that beat expectations on revenue, but earnings per share (EPS) of $9.11 missed the consensus estimate of $9.85, according to one source. The EPS figure was boosted by unrealized equity gains from investments. Alphabet's revenue climbed 24% year over year to $119.8 billion in Q2 2026, exceeding Wall Street estimates.
Google Cloud performed strongly, with revenue surging 82% year over year to $24.8 billion in Q2 2026, operating income of approximately $8.8 billion, and operating margins of roughly 35%. CEO Sundar Pichai noted that over 2,000 enterprises consumed more than 100 billion tokens in the last year, and nearly 500 Google Cloud customers processed over 1 trillion tokens. "All of this momentum is driving growth in our paid token usage," Pichai said.
Alphabet's capital spending has more than doubled in just a few years. CFO Anat Ashkenazi announced a $15 billion increase in capital expenditure guidance, now expecting between $195 billion and $205 billion for the full year. The company spent $78.6 billion in capex during the first six months of 2026 and expects to spend approximately $126 billion in the second half. Roughly 60% of Alphabet's capex will go toward servers and custom Tensor Processing Units, while 40% will fund data centers and networking infrastructure.
Alphabet's purchase commitments and other contractual obligations totaled $811 billion as of the end of Q2 2026, a huge increase from $332 billion at the end of Q1. The company expects to generally fulfill all purchase commitments by 2030, while energy service agreements range from 2 to 26 years, with obligations through 2054. A Nikkei investigation estimated that the technology industry carries roughly $1.65 trillion in off-balance-sheet obligations, including leases, GPU commitments, and joint ventures, with Alphabet's share at an estimated $250 billion.
Google Cloud CEO Thomas Kurian stated that customers are spending 50% more. Alphabet's cloud backlog expanded to $514 billion from roughly $460 billion three months prior. Remaining performance obligations climbed to $520 billion as of the end of June 2026. Alphabet is facing a severe shortage of compute capacity and plans to increase capacity through third-party providers, while also ramping up direct sales of its custom Tensor Processing Unit systems.
AI developments such as agents consume large amounts of compute power, contributing to supply constraints. Greater AI use is leading to more token consumption, which is becoming a cost concern for enterprises. U.S. data center capacity is expected to double over the next three years, according to a Synergy Research Group report. Chief Analyst John Dinsdale said, "It is indisputable that constrained availability of power and rising local concerns are crimping plans."
Separately, the European Commission fined Google 890 million euros ($1.01 billion) for non-compliance with the Digital Markets Act for self-preferencing its services on Google Search and restricting businesses from directing consumers to cheaper alternatives. EVP Teresa Ribera stated, "The best products should succeed because they're better, not because they're owned by the company."