Alphabet said Wednesday it was targeting capital spending of between $175 billion and $185 billion this year, in another aggressive spending increase by parent Google as it deepens its investments to push ahead in the AI race.
On average, analysts expected Alphabet to spend about $115.26 billion this year, according to data compiled by LSEG.
The company’s shares fell more than 6% in extended trading.
Google Cloud revenue grew 48% to $17.7 billion in the fourth quarter ended in December, compared with analysts’ average estimate of a 35.2% increase, according to data compiled by LSEG.
Large cloud computing companies have invested hundreds of billions of dollars to grow their AI infrastructure, both to meet growing enterprise demand for their cloud services and to drive their own development of AI technologies and products.
Like its larger rivals, Amazon Web Services and Microsoft’s Azure, Google Cloud has been grappling with capacity constraints that have affected its ability to capitalize on its customers’ demand for AI.
Together with Meta, the three cloud companies are collectively expected to spend more than $500 billion on AI this year. Last week, Meta increased its capital spending for AI development this year by 73%, aiming to spend between $115 billion and $135 billion, while Microsoft also reported record quarterly capital spending.
The aggressive expansion of payout comes at a time when investors are increasingly concerned about the benefits of AI investments. However, Google has been able to show great progress in its AI efforts.
The launch of its latest Gemini 3 model in November was well received and propelled the company forward in the AI arms race. Following the launch, Sam Altman, CEO of OpenAI, a leader in AI and creator of ChatGPT, reportedly issued an internal “code red” to push teams to accelerate development.
Google’s Gemini AI assistant app surpassed 650 million monthly users in November, while the company’s AI Overviews feature in search also reached more than 2 billion monthly users.
Last month, Google struck a deal to power Apple’s revamped Siri voice assistant with its Gemini models, a partnership that opens up a huge market for Google, with Apple’s installed base of more than 2.5 billion devices.
—By Deborah Sophia, Reuters