Alphabet may raise its 2026 capex guidance to $200 billion amid AI infrastructure expansion.

Original author: Li Jia

Source: Wall Street Journal

Alphabet, Google's parent company, will announce its second-quarter earnings after market close on July 22 local time (early morning of July 23 Beijing time), but the market’s primary focus is not on quarterly profit figures, but on whether management will further raise its AI capital expenditure (Capex) guidance.

Robert Castellano, President of The Information Network with over 40 years of experience in technology industry research, wrote that multiple supply chain signals suggest Alphabet’s previous forecast of $180 billion to $190 billion in Capex for 2026 may have been overly conservative. As AI data center construction continues to accelerate and demand for cloud computing remains strongly growing, Alphabet’s investment in AI infrastructure over the coming years is likely to remain on an upward trajectory.

Castellano expects Alphabet to raise its 2026 capital expenditure guidance to $190 billion to $200 billion in its earnings report, while maintaining its statement that 2027 spending will approach $300 billion.

Meanwhile, Deutsche Bank has also significantly raised its forecast for Alphabet’s future capital expenditures. According to Wall Street Journal’s previous article, Deutsche Bank expects Alphabet’s 2027 Capex to reach approximately $325 billion, a notable increase from its prior forecast of $250 billion; capital expenditures in 2028 could rise further to between $365 billion and $370 billion.

If this trend materializes, it suggests that the AI infrastructure investment cycle is still expanding, and previous market concerns about AI capital expenditures nearing a peak and growth momentum slowing may be reassessed.

The wave of investment in AI infrastructure is entering a phase of larger-scale expansion, and the direction of Alphabet's capital expenditures holds market significance that far exceeds the implications of a single quarterly earnings report.

As hyperscale cloud providers continue to significantly invest in data centers, computing power, and energy infrastructure, capital spending is shifting from incremental growth to a long-term competition measured in hundreds of billions of dollars.

According to market data, the combined capital expenditures of Alphabet, Amazon, Microsoft, Meta, and Oracle have surged from $271 billion over the 12 months ending April 2025 to $482 billion over the 12 months ending April 2026. Based on current guidance and market expectations, the total capital expenditures for these five giants in 2026 are projected to reach $745 billion to $775 billion, representing an increase of approximately 55% to 61% compared to the previous period.

This figure not only reflects the tech giants' bet on the commercialization potential of AI, but also signifies that they are becoming the core driving force behind demand growth across the entire semiconductor industry chain.

It should be noted that the more than $770 billion in capital expenditures will not all flow directly to chip suppliers; it includes multiple areas such as servers, networking equipment, data center construction, land, power infrastructure, and energy supply systems.

However, from the perspective of industrial chain transmission, each newly built AI data center drives synchronized expansion across multiple sectors—including high-performance computing chips, HBM memory, advanced packaging, wafer manufacturing, test equipment, and high-speed interconnection networks—creating a comprehensive supply chain stimulation effect from AI infrastructure investment.

The market's focus lies in the fact that current demand in the AI industry chain is not driven by a single company, but rather determined collectively by a few ultra-large cloud providers. Their procurement pace for GPUs, custom ASICs, HBM, optical networks, and data center power systems is becoming a key indicator of the overall semiconductor cycle's health.

Therefore, whether Alphabet's capital expenditures are further increased is not only a judgment on the prospects of the Gemini model and Google Cloud business, but also a validation of the intensity of demand for the next phase of AI infrastructure.

Recently, Meta considered selling part of its AI infrastructure capacity to external customers, sparking market discussions about whether AI investment has become excessive. However, from an industry perspective, this move appears more like an effort to improve asset utilization rather than reduce investment.

According to Wells Fargo's adjusted forecast, Meta is externalizing part of its AI infrastructure capacity primarily due to a timing mismatch in the release of internal inference demand, aiming to realize asset returns earlier by renting out capacity. This indicates that Meta is commercializing its already invested computing resources, rather than being forced to absorb excess capacity due to insufficient demand.

In comparison, Alphabet has stronger internal absorption capacity. Google Cloud currently has a backlog of $462 billion in contracts, with enterprise customers’ demand for AI computing power and cloud services providing strong order support. This means Alphabet’s additional capital investments can more directly translate into future revenue growth, and the commercial certainty of its capital expenditure expansion is higher.

For the market, the key takeaway from Alphabet's Q2 earnings reported on July 22 is not just its profitability and revenue performance, but whether management will further raise its AI capital expenditure outlook.

If Alphabet raises its 2026 capital expenditure guidance, it will reinforce market confidence in the sustainability of the AI infrastructure investment cycle and provide new fundamental support for the semiconductor, storage, advanced packaging, and data center industries.

Conversely, if capital expenditures fall below expectations, the market may reassess the return on investment timeline for AI, creating short-term downward pressure on valuations of related technology stocks.

As Microsoft, Meta, and Amazon release their earnings, Wall Street will further observe whether the AI infrastructure race is still accelerating and whether hundreds of billions of dollars in capital investment can continue to translate into revenue growth.