Alphabet reported its best-ever quarter for cloud growth, but investor concerns mounted after a $15 billion increase to its 2026 capital spending plan.
Google Cloud revenue surged 82% to $24.8 billion, beating expectations. Advertising revenue also topped estimates. Total quarterly revenue hit $119.8 billion.
Despite the top-line beat, shares fell about 3% in extended trading. The stock dipped after Chief Financial Officer Anat Ashkenazi announced the new capex forecast: between $195 billion and $205 billion for 2026, up from a prior range of $180-$190 billion.
"The demand still outpaces that investment," Ashkenazi said, citing faster-than-expected delivery of new capacity.
The spending increase comes as Google faces pressure over AI model delays. The flagship Gemini 3.5 Pro was postponed, raising questions about its competitive position against OpenAI and Anthropic.
CEO Sundar Pichai acknowledged the challenges, stating Google is "applying a lot of our compute and effort" to training the next-generation Gemini 4 to remain at the frontier.
The company also reported its first-ever quarter of negative free cash flow, burning $5.9 billion. Analysts warned the combination of rising capex and negative cash flow increases financial risk.
Google is now the third-largest cloud provider behind Amazon Web Services and Microsoft. The company also began recognizing revenue from direct sales of its TPU chips, which compete with Nvidia's GPUs.