Google's Infrastructure Shift Through Capex Spending

Sundar just told you Google is becoming an infrastructure company and nobody’s repricing. The victory lap covers $400B in annual revenue, 18% growth, and 48% cloud acceleration. The numbers are legitimately excellent. Beat on both top and bottom lines. But the number he slipped in quietly is the one that matters: $175 to $185 billion in 2026 capex. Wall Street was modeling $119.5 billion. Google just told the market it plans to spend 50% more than anyone expected, and nearly double what it spent in 2025. Put that in perspective. There are only 59 companies in the S&P 500 that Alphabet couldn’t outright purchase with one year’s capex budget. This is infrastructure spending on the scale of a mid-sized nation’s GDP. The stock tells you everything about how the market processed this. It dropped 7% in minutes after the print, then clawed back to down ~3%. Investors loved the earnings. They panicked at the spend. Because $180 billion in capex means free cash flow gets compressed even as revenue grows. Operating cash flow rose 34% this quarter, but free cash flow barely moved because capex ate every incremental dollar. Google Cloud’s $240 billion backlog, up 55% sequentially, is the justification. They signed more billion-dollar deals in 2025 than the previous three years combined. Cloud revenue grew 48%, margins expanded to 30%. This is real demand from real customers. The spend has receipts. The question investors are actually asking: is Google transitioning from a 30%+ margin ad business into a capital-intensive infrastructure provider that happens to run ads? Because Meta’s 2026 capex guide is $115-135B. Microsoft is at ~$150B annualized. Google just outbid them all. Pichai mentioned they cut Gemini serving costs by 78% over 2025. That efficiency gain is real. But when your response to 78% cost reduction is to double your infrastructure budget, you’re telling the market you see demand curves that justify spending at a scale nobody else is willing to match. The ad business is still the engine. Search grew 17%. But YouTube ads missed estimates. The growth story is quietly shifting from “best ad platform ever built” to “best AI infrastructure play with an ad business attached.” That’s the trade Wall Street is trying to figure out tonight.