Alphabet is sharply increasing its artificial intelligence infrastructure spending while flagging new risks linked to the technology and the scale of its investment.
The Google parent has signalled that capital expenditure could reach around 185 billion dollars this year, more than double its 2025 outlay, with much of the money going toward data centres, specialised servers and networking infrastructure tied to AI workloads and cloud services.
In its latest annual report, Alphabet has updated its risk disclosures to reflect the strains of this buildout. It notes the possibility of ending up with excess capacity if demand or technology evolve differently than expected, and warns that complex, long‑term leasing arrangements with third‑party data centre operators could raise costs and operational complexity. The company also highlights that large commercial contracts may increase obligations should the firm, its partners or vendors fail to perform.
“To meet the compute capacity demands of AI training and inference, as well as traditional cloud computing services, we are entering into significant leasing arrangements with third party operators, which may increase costs and operational complexity,” the report notes. “Large commercial agreements could also increase liabilities and obligations in the event of nonperformance by us, our counterparties, or vendors.”
To help fund this expansion, Alphabet is turning more heavily to debt. Following a major bond sale last year that pushed long‑term debt to roughly 46.5 billion dollars, the company is planning a further 20 billion dollar bond offering, expected to be split into several tranches and to include a 100‑year sterling bond. Investors appear eager for exposure to its AI growth, with one person familiar with the offering describing it as heavily oversubscribed.
Chief Financial Officer Anat Ashkenazi says the company wants to invest aggressively but in a “fiscally responsible way” that still leaves Alphabet in a strong financial position. Chief Executive Sundar Pichai, when asked what keeps executives awake at night, responded “compute capacity,” going on to cite constraints around power, land, and supply chains.
Alphabet is part of a broader investment wave as the largest technology groups pour money into AI infrastructure. Analysts estimate that Alphabet, Microsoft, Meta and Amazon together could lift capital spending more than 60 per cent this year from already record 2025 levels, driven by high‑end chips, new data centres and supporting networks.
At the heart of Google’s AI push is Gemini, its large language model and assistant competing with offerings from OpenAI and Anthropic. Pichai said the Gemini app now has over 750 million monthly active users, up from about 650 million the previous quarter. As generative AI use grows, Alphabet faces the possibility that people may rely less on traditional web search, which could shift the dynamics of its dominant ad business.
“We and our competitors are constantly adjusting to meet this shift and provide new and evolving advertising formats,” the filing says. “There is no assurance that we will adapt effectively and competitively to meet this shift, and that such advertising formats, strategies, and offerings will be successful.”
So far, the company has defied worries that AI will quickly erode its search and advertising revenues. In the last quarter, ad revenue rose 13.5 per cent from a year earlier to 82.28 billion dollars, even as Alphabet channels billions into infrastructure aimed at cementing its long‑term role in the AI economy.