Microsoft, Meta and Google earnings quieted critics of AI spending as Big Tech capex swells to $725 billion.
Higher component costs, including memory chips, and plans to build more data centers than previously anticipated drove the upward revision in capital expenditure (capex).
Strong cloud results eased fears about higher AI spending. Google has raised its 2026 capex projection by $5 billion, while Meta has raised its own by $10 billion. Google Cloud sales rose by a record 63%, sending the company's shares more than 6% higher in post-market trading.
Alphabet Inc. and Meta Platforms Inc. on Wednesday raised their capital spending outlooks. Four of the biggest tech companies now project combined 2026 spending of up to $725 billion, which is more than the GDP of countries such as Switzerland or Turkey.
Alphabet, Meta, Amazon, and Microsoft are racing to build out data centers to meet surging demand for AI compute. They insist the technology is a once-in-a-generation opportunity and that the unprecedented spending is both justified and poised to pay off.
Strong cloud results across the board have, for now, eased concerns about overspending. The three leading hyperscalers, Amazon Web Services, Microsoft Azure, and Google Cloud, all posted higher sequential growth rates. Google Cloud revenue surged 63.4% year over year, a record pace.
| Company | Initial 2026 Capex Plan | Revised 2026 Capex Plan |
|---|---|---|
| Amazon | $200 billion | Unchanged |
| Meta | $115 billion to $135 billion | $125 billion to $145 billion |
| Alphabet | $175 billion to $185 billion | $180 billion to $190 billion |
| Microsoft | $88.2 billion plus* | $190 billion** |
*Microsoft said last year that its capex for fiscal 2026, which ends in June, would be higher than the $88.2 billion it spent in FY25.
**Forecast is for calendar year 2026.
"We are seeing unprecedented internal and external demand for AI compute resources. The investments we are making in AI are delivering strong growth, as evidenced by the record revenue and backlog growth in Google Cloud and strong performance in Google Services. Looking ahead, these strong results reinforce our conviction to invest the capital required to continue to capture the AI opportunity," Alphabet CFO Anat Ashkenazi said on the company's analyst call.
She said the company's capex next year will "significantly increase compared to 2026."
Meta and Microsoft said spending would be higher this year, in part because of surging component prices, likely for memory chips.
"For calendar year 2026, we expect to invest roughly $190 billion in capital expenditures, which includes approximately $25 billion from the impact of higher component pricing," Microsoft CFO Amy Hood said on the earnings call.
Meta CFO Susan Li said the capex increase "reflects our expectations for higher component pricing this year and, to a lesser extent, additional data center costs to support future year capacity."
"The 'AI capex is speculative' narrative is dead," The Futurum Group CEO Daniel Newman said in an X post. "The companies investing in AI infrastructure today are buying the most valuable real estate of the next decade, and tonight they showed exactly why."
Alphabet's results were comparatively strong, and the stock rose 6.4% in overnight trading following the report.
Pivotal Research raised its price target on GOOGL to $470 from $420, implying 34% upside from the stock's last close, and maintained a "Buy" rating. The research firm said in an investor note that Alphabet reported a "much stronger-than-expected" first quarter, including a fifth straight quarter of accelerating search revenue growth of 19%, which offset concerns about the higher capex.