Google earnings night: Capex guidance likely to be raised? Could reach $200 billion in 2026
- Core Thesis: The focus of Alphabet's upcoming Q2 earnings report isn't profitability, but its AI capital expenditure (Capex) guidance. Supply chain signals suggest that its 2026 Capex expectations may be conservative and will be raised to $190-200 billion. This indicates the AI infrastructure investment cycle is still expanding and will reprice market concerns over the peak of AI investment.
- Key Elements:
- Analysts expect Alphabet to raise its 2026 Capex guidance to $190-200 billion, while Deutsche Bank predicts its 2027 Capex could reach approximately $325 billion.
- The five major tech giants (Alphabet, Amazon, Microsoft, Meta, Oracle) are expected to have combined 2026 full-year Capex of $745-775 billion, representing a 55%-61% increase from the previous period.
- Alphabet has a stronger capacity for internal absorption. Google Cloud has a backlog of $462 billion in orders, meaning new Capex can directly correspond to future revenue growth.
- Meta is considering leasing out some AI infrastructure capacity, aiming to improve asset utilization rather than cut investment, as there is a time lag in the release of internal inference demand.
- If Alphabet raises its Capex guidance, it will reinforce the market's assessment of the sustainability of the AI infrastructure investment cycle, providing support for the industry chain including chips and storage. Conversely, it could exert pressure on the valuations of related tech stocks.
Original Author: Li Jia
Original Source: Wall Street News
Google parent company Alphabet is set to release its second-quarter earnings after the US market close on July 22 (early morning of July 23, Beijing time). However, the market's main focus isn't the single-quarter profit performance, but whether management will further raise its AI capital expenditure (Capex) guidance.
Robert Castellano, President of The Information Network, who has over 40 years of experience in tech industry research, wrote that multiple supply chain signals indicate Alphabet's previously stated 2026 Capex expectation of $180-$190 billion may already be conservative. With AI data center construction continuously accelerating and cloud computing demand maintaining strong growth, Alphabet's AI infrastructure investment over the next few years could still maintain an upward trend.
Castellano expects Alphabet may raise its 2026 capital expenditure guidance to $190-$200 billion in its earnings report, while maintaining the related statement that 2027 spending will approach $300 billion.
Meanwhile, Deutsche Bank has also significantly increased its forecast for Alphabet's future capital expenditure. According to a previous article by Wall Street News, Deutsche Bank expects Alphabet's 2027 Capex to reach approximately $325 billion, a notable increase from its previous forecast of $250 billion; capital expenditure in 2028 could further rise to $365-$370 billion.
If this trend materializes, it means the AI infrastructure investment cycle is still expanding, and the market's previous concerns about AI capital expenditure peaking and growth momentum slowing could face repricing.
AI Arms Race Heats Up: Capital Expenditure of Five Tech Giants Could Exceed $770 Billion in 2026
The wave of AI infrastructure investment is entering a phase of larger-scale expansion. The direction of Alphabet's capital expenditure holds market significance far beyond the single-quarter earnings report itself.
As hyperscale cloud providers continue to ramp up investment in data centers, computing power, and energy infrastructure, capital spending is shifting from gradual, incremental growth to a long-term race measured in hundreds of billions of dollars.
According to market data, the combined capital expenditure of five companies — Alphabet, Amazon, Microsoft, Meta, and Oracle — has surged from $271 billion over the twelve months ending April 2025 to $482 billion over the twelve months ending April 2026. Based on current guidance and market expectations from each company, the total 2026 annual capital expenditure for the five giants is expected to reach $745-$775 billion, representing a 55% to 61% increase compared to the previous cycle.
This figure not only reflects tech giants' bets on the commercial prospects of AI but also indicates they are becoming the core driver of demand growth across the entire semiconductor supply chain.
Five Giants Dominate the AI Infrastructure Investment Cycle
It is important to note that over $770 billion in capital expenditure will not all flow directly to chip suppliers. This encompasses multiple areas including servers, network equipment, data center construction, land, power facilities, and energy supply systems.
However, looking at the supply chain transmission effect, each new AI data center will drive simultaneous expansion across multiple links. From high-performance computing chips and HBM memory to advanced packaging, wafer fabrication, testing equipment, and high-speed interconnect networks, AI infrastructure investment is creating a complete supply chain pull effect.
The market's core focus is that the current demand in the AI supply chain is not driven by a single company, but is collectively determined by a few hyperscale cloud providers. Their procurement pace for GPUs, custom ASICs, HBM, optical networks, and data center power systems is becoming a key metric for gauging the health of the entire semiconductor cycle.
Therefore, whether Alphabet further raises its capital expenditure is not just a judgment on the prospects of its Gemini model and Google Cloud business, but also a validation of the intensity of AI infrastructure demand in the next phase.
Meta Leases Capacity as Buffer, Google Orders Provide Backstop — Two Paths for AI Capex
Recently, Meta considered selling some of its AI infrastructure capacity to external customers, sparking market discussions about potential overinvestment in AI. However, from an industry logic perspective, this move appears more aimed at improving asset utilization rather than cutting investment.
According to adjusted forecasts from Wells Fargo, Meta's push to externalize some AI infrastructure capacity is primarily due to a time lag in the release of internal inference demand, aiming to achieve asset returns earlier through external leasing. This suggests Meta is commercializing its already invested computing resources, rather than being forced to absorb excess capacity due to insufficient demand.
In contrast, Alphabet has stronger internal absorption capabilities. Google Cloud currently holds a contract backlog of $462 billion, and enterprise customer demand for AI computing power and cloud services provides relatively strong order support. This means Alphabet's new capital investment can be more directly tied to future revenue growth, giving its capital expenditure expansion higher commercial certainty.
Alphabet's Earnings Report Becomes a Key Observation Window for the AI Cycle
For the market, the key to Alphabet's second-quarter earnings release on July 22 is not just profit and revenue performance, but whether management will further raise its AI capital expenditure expectations.
If Alphabet raises its 2026 capital expenditure guidance, it will strengthen the market's judgment on the sustainability of the AI infrastructure investment cycle and provide new fundamental support for the chip, memory, advanced packaging, and data center supply chains.
Conversely, if capital expenditure falls short of expectations, the market may reassess the AI investment return cycle and create short-term pressure on valuations of related tech stocks.
As Microsoft, Meta, and Amazon subsequently report their earnings, Wall Street will further observe whether this AI infrastructure race is still accelerating and whether the hundreds of billions of dollars in capital investment can be consistently translated into revenue growth.
