Alphabet’s capital expenditure (CapEx) grew to $35.7 billion in the first quarter of 2026, led by heavy investment in datacentres to fuel its AI offerings.

In an earnings call on Wednesday evening, Alphabet’s chief financial officer Anat Ashkenazi told shareholders that he expects capital expenditure to “significantly increase” in 2027, as the company revised its 2026 spend projection up by five billion dollars.

Much of this expenditure is going on data centres and other AI infrastructure to allow the company to expand its enterprise offerings.

“Our AI investments and full stack approach are lighting up every part of the business,” said Sundar Pichai, Alphabet’s chief executive, adding that “Our cloud revenue would have been higher if we were able to meet the demand [for compute].”

The tech giant’s spend was 106 per cent higher than in Q1 2025, marking another quarter of CapEx growth. Alphabet said it plans to continue its spending to between $180 billion and $190 billion in 2026.

Google Cloud, Alphabet’s second largest segment after its services division, increased revenues by 63 per cent and now makes up 18 per cent of the company’s total income. In its earnings report, the company said the growth was led by increased use of its Google Cloud Platform across enterprise AI solutions and enterprise AI infrastructure.

The company said it had a backlog of demand for its cloud services of $460 billion, further illustrating the strong demand for increased compute in the tech sector.

Alphabet’s operating income for the quarter was $39.7 billion, 36 per cent higher than Q1 2025, and its revenue beat market predictions by 2.7 per cent.

The company’s shares rose in response to the news, trading up 6.5 per cent in out of hours trading at the time of writing.

AI-focused companies around the world are spending billions on compute expansion, although it has not been without difficulties. Earlier in April, OpenAI paused its ambitious £31 billion Stargate UK datacentre buildout, citing high energy costs and the regulatory landscape.

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