Alphabet has raised its 2026 capital expenditure guidance to between $195-205 billion, up from its earlier forecast of $180-190 billion, as reported by Reuters. The tech giant's decision follows Google Cloud revenue jumping 82% year-on-year to $24.8 billion during the April-June quarter, comfortably ahead of market expectations. Total revenue rose to $119.8 billion while advertising revenue remained resilient at $81.6 billion. According to Reuters, Alphabet CFO Anat Ashkenazi stated that "We have increased our capacity quite significantly over the past three years. The demand still outpaces that investment." The company's strong cloud performance reflects enterprises accelerating spending on AI-powered cloud services as the AI infrastructure race intensifies.
Alphabet's first-ever quarterly cash burn of $5.9 billion during Q2 has rattled investors ahead of upcoming Big Tech earnings reports, as reported by NDTV Profit. The spending underpinning this cash burn is only expected to rise, with Alphabet now projected to spend an additional $15 billion in 2026 and signalling another increase the following year. Before the opening bell on Thursday, shares of Alphabet were down 5%, while Amazon, Microsoft and Meta were down between 2% and 4%, reflecting investor concerns about mounting AI spending pressures. Charu Chanana, chief investment strategist at Saxo Markets, noted that "The risk is tilted towards further increases, particularly while Microsoft and others remain capacity-constrained." Analysts expect Alphabet and Amazon to burn cash in 2026, while Meta's cash flow is likely to shrink 95.7% to just $1.85 billion.
Google faces stiff competition from rivals such as OpenAI and Anthropic, particularly in AI coding tools, following delays to the launch of its Gemini 3.5 Pro model, as reported by Reuters. According to Google CEO Sundar Pichai, the company has already begun training Gemini 4, and Alphabet remains committed to staying at the forefront of AI development. The competitive pressure is driving Big Tech firms to spend well over $700 billion on AI this year, with investment expected to exceed $1 trillion next year as competition intensifies. Google Cloud's strong performance, which has outpaced its larger competitors in recent quarters and may be helping it gain market share, is another factor raising competitive stakes for Amazon and Microsoft. Alphabet executives said they plan to lease additional data centre capacity from third parties to meet customer demand, even though doing so is expected to weigh on profit margins.
Following Wednesday's results, at least 20 brokerages raised their price targets for Alphabet, lifting the median target to $430 — nearly 26% above the previous closing price, as reported by NDTV Profit. Citizens remained the most bullish with a target of $515, while TD Cowen had the lowest target at $240. However, investor focus has shifted to whether AI revenue can grow faster than capital expenditure, depreciation and operating costs. Amazon Web Services is expected to post revenue growth of 31.04% this quarter, up from 28.4% in the previous three months, while Microsoft is projected to report cloud growth of 39.98%, broadly in line with the 40% growth recorded in the January-March quarter. The capex-to-revenue ratio is expected to rise sharply across Big Tech: Alphabet's ratio is projected to climb to 41% from 23%, Microsoft's to 45% from 31%, Amazon's to 25% from 18%, and Meta's to 54.9% from 35.9%.
Brent crude futures rose about 3.4% to settle at $94.07 per barrel, hitting their highest levels in over a month and briefly topping $95 per barrel, as reported by Bloomberg. West Texas Intermediate futures climbed about 3% to close at $86.83. Following the eleventh consecutive round of U.S. military strikes against Iran, oil prices moved higher after the U.S. signaled that Iran was unwilling to return to negotiations. Secretary of State Marco Rubio noted that Iran is 'not serious about talks' and emphasized that American forces will continue safeguarding shipping lanes through the Strait of Hormuz. This oil price surge is creating broader market pressures through rising inflation expectations and higher Treasury yields, making the Federal Reserve's policy decisions more complicated.
