Big tech companies are pouring money into AI infrastructure at a pace that's hard to ignore. Back in mid-February, Microsoft (MSFT), Alphabet (GOOG) (GOOGL), Amazon (AMZN), and Meta (META) were on track to spend at least $650 billion on AI in 2026, with no real signs of slowing down. 

By late April, well-known analyst Gartner was projecting global IT spending to hit $6.31 trillion in 2026, up 13.5% from the year before. That's why every capital spending update from these companies matters, especially when they've collectively committed more than $630 billion to AI infrastructure this year alone.

Alphabet is right in the thick of it. The company bumped its 2026 capital spending estimate to $180 billion to $190 billion from an earlier range of $175 billion to $185 billion, saying the increase reflects growing confidence in Google Cloud demand rather than any kind of trouble. That's nearly double the $91 billion it spent in 2025. And CFO Anat Ashkenazi made it clear on the earnings call that 2027 will see CapEx climb even higher.

So if Alphabet is spending at levels that might have once worried Wall Street, why does the stock still seem to have investors' trust? 

Earnings Strength Masks Spending Surge

Alphabet, Google's parent company, controls one of the biggest digital ecosystems out there. It makes most of its money from search and online ads, but cloud computing and AI infrastructure are becoming bigger parts of the story.

The stock has done well. Shares are up 139.4% over the past year and another 23.37% so far in 2026, even with all the talk about higher spending. 

Investors seem willing to pay up for it, too. Alphabet trades at about 30.33 times forward earnings, well above the sector average of 13.44 times.

The company also pays a dividend now, though it's small. The yield is 0.24%, with a quarterly payout of $0.21 that was last paid this past March. The payout ratio is just 7.60%, and dividends have only been increasing for one year, so it's clear most of the money is still going back into the business.

The latest quarter shows why. Alphabet brought in $109.9 billion in Q1 2026, up 21.8% from a year earlier and better than the $107 billion analysts expected. Earnings per share hit $5.11, way above the $2.67 estimate. Operating margin improved to 36.1% from 33.9%, but free cash flow margin fell to 9.2% from 21%, a sign that heavy capital spending is already starting to weigh on cash generation even as profits hold up.

The AI Engine Powering Alphabet’s Next Phase

Alphabet is putting $10 billion into Anthropic at a $350 billion valuation, with another $30 billion possible if certain targets are hit. The deal also means Google Cloud will supply 5 gigawatts of computing power over the next five years, along with access to its TPU chips. Anthropic has been gaining traction fast, especially with its Claude Code tool, which helps explain why Alphabet is betting this big. It's a bit messy though, since Anthropic competes with Google in some areas and also takes money from Amazon.

Further, the company is trying to get into government work. Alphabet is talking with the U.S. Department of Defense about using its Gemini AI in classified settings. The deal would come with limits on things like mass surveillance and fully autonomous weapons, but it fits with the Pentagon's push to use AI more broadly.

On top of that, Alphabet is putting more money into AI startups. CEO Sundar Pichai has said the company is stepping up investments in this space, trying to get a piece of the growth as AI adoption picks up. That includes expected gains from older bets like SpaceX, which could bring in serious cash when it goes public.

Wall Street’s Bet on Long-Term Payoff

Analysts expect Alphabet to earn $2.84 per share in the current quarter ending June 2026, up 22.94% from last year's $2.31. For the September quarter, estimates are at $3.01, a 4.88% gain year-over-year (YOY). For the full year 2026, earnings are expected to hit $11.62, up 7.49% from $10.81 in 2025.

Evercore ISI's Mark Mahaney has an “Outperform” rating and a $400 price target. He's aware of the $175 billion to $185 billion capital spending plan for 2026 but thinks strong Search results and solid Cloud growth should lead to an earnings beat. Bank of America's Justin Post kept his “Buy” rating with a $370 target and called Alphabet a "top pick," saying that Gemini's rollout in Search and faster Google Cloud adoption should outweigh the drag from heavy AI spending, a weaker ad market, and tougher competition.

All 55 analysts covering the stock rate it a consensus “Strong Buy”, with an average price target of $380.77. The stock is already trading above that, and the Street-high price of $420 looks like a potential upside of 9.23%.

Conclusion

Alphabet's surging CapEx plans would normally raise red flags, but investors are staying put because the spending appears tied to real revenue opportunities rather than speculative bets. Google Cloud is growing fast, enterprise AI adoption is accelerating, and the company's balance sheet can absorb the burn without straining margins or returns. Wall Street seems comfortable treating this as infrastructure investment with visible payback rather than reckless expansion. With earnings still beating expectations, analyst consensus firmly bullish, and the stock already trading slightly above the average price target, shares look more likely to grind higher as long as Cloud momentum holds and AI monetization stays on track. 

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