Google parent company spending like a drunken sailor as capex triples over 2 years

Microsoft also ramping up spending, but investors concerned about overshooting demand

Alphabet, Google's parent company, expects capital expenditures to hit $93 billion in 2025, largely to meet demand from cloud customers, according to its recent financial report.

On the back of results that revealed revenue for the third quarter was $102.34 billion, representing 16 percent year-on-year growth, Alphabet signaled a headlong charge into datacenter building to meet demand for AI services well into next year. Capex was $32.25 billion in 2023, and the estimate for 2025 stood at $75 billion in February.

Anat Ashkenazi, Alphabet senior veep and CFO, told investors: "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. We now expect capex to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion... Looking out to 2026, we expect a significant increase in capex."

Not to be outdone, Microsoft is also ramping up capex in the face of the AI boom and expects it to accelerate through its financial year. The figure for the first quarter of its financial year 2026 stands at $34.9 billion, according to recent results, larger than investment analysts had expected, and up from $24 billion in the previous quarter.

Amy Hood, executive veep and CFO, told investors this was largely driven by growing demand for the company's cloud and AI offerings. About half the spending was on "short-lived assets" such as GPUs and CPUs to support increasing Azure platform demand and first-party AI solutions, for example.

"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 said.

Microsoft's capital expenditure in the quarter stood at $34.9 billion, compared with Visible Alpha estimates of $30.34 billion.

However, investors were less than impressed. Shares of the company dropped by 3 percent in extended trading last night as the growth in capex worried investors who are are becoming increasingly concerned about an AI bubble, according to reports.

Oracle is also planning a massive datacenter expansion to meet the demand it expects for AI and has increased its borrowing to fund the spree. It has already launched an $18 billion bond sale and reports suggest it plans another $38 billion debt offering. Estimates suggest it will need to borrow $100 billion over four years to fulfill the demand of its $300 billion cloud compute contract with OpenAI.

Other reports suggest investors were concerned about the speed at which AI datacenter spending could offer revenue and that the rush to capture market share might see the big players overshoot demand. ®