Alphabet raises AI spending target to $205 billion as cloud demand surges

•Alphabet, the parent company of Google, has raised its 2026 capital expenditure guidance to $195-$205 billion, up from $180-$190 billion.

•The increased spending is due to soaring demand for AI computing capacity as Google competes with Microsoft, Amazon, and Meta to expand data centers and support complex AI models.

•Alphabet's cloud business saw a 82% year-on-year revenue jump to $24.8 billion in the April-June quarter, driving the company's decision to invest more in AI.

•The company's total revenue rose to $119.8 billion, with advertising revenue remaining resilient at $81.6 billion.

•Alphabet's higher spending plan weighed on investor sentiment, with shares slipping in extended trading after the revised capex outlook was unveiled.

•Alphabet's AI investments pushed the company into negative free cash flow, with an outflow of $5.9 billion in the quarter.