Alphabet, the parent company of Google, is significantly increasing its capital expenditures, projecting a rise to $93 billion by 2025. This surge is primarily aimed at addressing the escalating demand from cloud customers, as detailed in its latest financial report.
In its third-quarter results, Alphabet reported a revenue of $102.34 billion, marking a 16 percent increase compared to the previous year. The company is embarking on an aggressive expansion of its data center infrastructure to support the growing need for artificial intelligence services that are expected to persist through the coming year. In 2023, the capital expenditures were reported at $32.25 billion, with initial estimates for 2025 set at $75 billion as of February.
Anat Ashkenazi, Alphabet”s senior vice president and chief financial officer, addressed investors, stating, “We”re continuing to invest aggressively due to the demand we”re experiencing from cloud customers as well as the growth opportunities we see across the company.” She also updated the capex outlook, revising it to a range between $91 billion and $93 billion for 2025, up from earlier estimates of $85 billion. Looking ahead to 2026, a substantial increase in capital expenditures is anticipated.
Meanwhile, Microsoft is also amplifying its capital expenditures in response to the AI boom, with expectations that spending will accelerate throughout its financial year. For the first quarter of financial year 2026, capital expenditures reached $34.9 billion, surpassing analysts” expectations and rising from $24 billion in the preceding quarter. Amy Hood, executive vice president and chief financial officer of Microsoft, indicated that this increase is largely attributed to the heightened demand for the company”s cloud and AI solutions.
Hood noted that about half of the spending is dedicated to “short-lived assets,” such as graphics processing units (GPUs) and central processing units (CPUs), necessary to bolster the demands of the Azure platform and first-party AI solutions. “We”re increasing our spend on GPUs and CPUs. Therefore, total spend will increase sequentially, and we now expect the financial year 2026 growth rate to be higher than financial year 2025,” she explained.
Despite these robust figures, investors expressed concern, as Microsoft”s shares fell by 3 percent in after-hours trading. The rising capital expenditures have raised alarms among investors, who are increasingly wary of a potential bubble in the AI sector.
Additionally, Oracle is gearing up for a significant expansion of its data centers to meet anticipated AI demand, even as it ramps up its borrowing to finance this growth. The company has initiated an $18 billion bond sale and is rumored to be planning another debt offering of $38 billion. Projections suggest that Oracle may need to secure as much as $100 billion over the next four years to fulfill the demands of its $300 billion cloud computing contract with OpenAI.
Reports indicate that investor apprehension is growing regarding the pace at which spending on AI data centers can translate into revenue. There are concerns that the rush to capture market share may lead major players in the industry to exceed actual demand.
