Google Stuns Wall Street With $185B AI Spending Spree—Nearly Double Forecasts

Google just dropped a bombshell on Wall Street.

Alphabet revealed plans to spend up to $185 billion (£136 billion) on AI infrastructure, far exceeding analysts’ expectations of $119.5 billion. The market recoiled—shares slid as much as 7% after hours before recovering to finish about 2% lower.

The reaction came despite a blowout quarter.

Alphabet’s Q4 earnings beat expectations across the board. Revenue surged 18% to $113.8 billion, earnings per share hit $2.82, and Google Cloud revenue jumped 48% to $17.7 billion, easily topping forecasts.

None of that impressed investors.

Instead, all eyes locked onto Alphabet’s 2026 capital expenditure guidance of $175–$185 billion, nearly double the $91 billion it spent in 2025.

The Real Problem: A $240B Backlog

Google isn’t splurging by choice—it’s backed into a corner.

CFO Anat Ashkenazi revealed that Google Cloud’s backlog has ballooned to $240 billion, up 55% quarter-over-quarter and more than double year-over-year. In plain terms: Google has signed contracts it physically cannot fulfill without massive new data centers, chips, and AI compute.

Ashkenazi said the spending will support DeepMind’s AI workloads and overwhelming cloud demand, stressing the company will maintain a “very healthy financial position.” Markets weren’t convinced.

Gemini Changes the Stakes

Google’s AI push already has traction.

CEO Sundar Pichai said the Gemini app now exceeds 750 million monthly users, adding 100 million in a single quarter. The Gemini 3 model, launched in November 2025, topped rival benchmarks and reportedly triggered an internal “code red” at OpenAI.

Then came the Apple deal.

Bloomberg confirmed Gemini will power Siri on iPhones, potentially putting Google’s AI on 2.5 billion devices worldwide.

Efficiency gains help soften the blow. Google slashed Gemini serving costs by 78% in 2025, with Pichai noting that scale is driving dramatic improvements.

Why It Matters

For investors, this is a high-stakes gamble.

Alphabet’s market cap sits above $4 trillion. If the AI buildout succeeds, it could drive the next leg of growth. If it fails, the downside ripples through index funds, pensions, and retirement accounts.

For workers, the picture is mixed. The spending creates jobs in construction, chips, and data centers—but also accelerates automation that could replace human labor.

As RBC Capital Markets’ Brad Erickson put it, Gemini’s momentum and Cloud growth are “plenty good as proof points” to justify the spend.

Bottom Line

Google isn’t chasing hype. It’s racing reality.

With $240 billion in unfulfilled contracts, intensifying competition, and a landmark Apple partnership, Alphabet had little room to hesitate.

Wall Street asked for restraint.

Google responded by doubling down.