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In a bold move to keep up with explosive growth in AI and cloud computing, Alphabet, the parent company of Google, announced it will increase its capital expenditures for 2025 to $85 billion—a $10 billion rise from its previous forecast. This marks one of the company’s largest infrastructure investments to date, reflecting intense demand for cloud services and the rapid global race to dominate the AI space.

AI and Cloud Demand Fuel Massive Investment Surge

Alphabet first projected $75 billion in capital spending for 2025 earlier this year. That estimate already surpassed Wall Street’s $58.84 billion expectation, but surging demand has pushed the company to revise its plans upward.

The additional investment is aimed at building out Google's server and data center capacity, which executives say is under pressure due to a growing backlog of cloud customers. The current backlog now totals a staggering $106 billion, according to Alphabet CFO Anat Ashkenazi.

“This is a tight supply environment,” Ashkenazi said during the Q2 earnings call. “We’re doing everything we can to bring capacity online faster.”

A Breakdown of Where the Money Goes

The majority of Alphabet’s spending in Q2 2025 has gone toward technical infrastructure, with approximately two-thirds allocated to servers and the remaining one-third directed toward data centers and networking equipment. This investment strategy is part of a broader push to scale Google Cloud to meet AI-driven demand from enterprise clients.

Ashkenazi noted that the updated spending forecast is driven by three primary factors:

1. Increased server investments
2. Faster server delivery timelines
3. Acceleration in global data center construction

These factors reflect a broader trend across the tech sector: companies are preparing for years of sustained AI growth by making long-term infrastructure bets.

Strong Cloud Revenue Growth Reinforces Strategy

Alphabet’s bet on cloud is paying off. In the second quarter, Google Cloud revenue jumped 32% year-over-year, hitting $13.6 billion. That growth rate outpaces many competitors and further justifies the aggressive expansion.

Other tech giants such as Microsoft and Amazon have also reported similar infrastructure expansions, indicating a larger industry shift where hyperscalers are doubling down on AI-readiness.

More Spending Likely in 2026

Looking ahead, investors can expect even more capital outlays in the years to come. Ashkenazi suggested that 2026 could see another spending increase, although she did not provide exact figures. “The growth opportunities across Alphabet are significant,” she said. “We will share more in future earnings calls.”

While heavy investments typically mean lower short-term profits due to amortization and depreciation, Alphabet appears unfazed. The company believes the long-term rewards—greater market share in cloud and AI—outweigh near-term margin compression.

“We’re increasing capacity with every quarter that goes by,” Ashkenazi emphasized. “And we’ll continue doing so to meet the evolving needs of our customers.”

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