Alphabet boosted capex to $205B for AI infrastructure. Its $514B cloud backlog shows demand is already contracted. Analysts said the investment is paying off.
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Alphabet (GOOGL) raised its full-year capital expenditure guidance to as much as $205 billion in the same quarter it disclosed a $514 billion cloud backlog. The two numbers, from the company's most recent earnings release, paint a picture of a company investing heavily in AI infrastructure while customers sign multiyear commitments.
Sundar Pichai told analysts that roughly 90% of Fortune 100 companies now use Alphabet's Gemini Enterprise model. Customer acquisition is doubling year over year, and existing clients exceed their original consumption commitments by more than 50%, he said.
The capex increase covers servers, GPUs, CPUs, memory and custom TPUs. The rest goes to data center construction and networking gear. About 60% of the spending goes to server infrastructure and 40% to facilities and connectivity. Alphabet holds more than $240 billion in cash and marketable securities, giving it room to fund the build-out even if free cash flow turns temporarily negative.
Google Cloud's backlog reflects multiyear enterprise contracts. Alphabet expects to recognize a little over half of it as revenue in the next 24 months. That means a significant portion of the infrastructure now being built is effectively presold, the company said.
Revenue from Google Cloud accelerated 82% year over year in the quarter. Segment operating margins expanded. Pichai described the early returns on prior AI infrastructure spending as materializing.
Alphabet shares traded at $345.90, down 0.13%, with an Alpha Score of 70 (Moderate) from AlphaScala.
Analysts following the company have pointed to the backlog as the more important metric because it validates the spending. Without contracted demand, the capex would be speculative. With the backlog, Alphabet's infrastructure build-out looks like a response to already-visible customer needs.
Alphabet expects to recognize more than half of the backlog by mid-2028.
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