MW Why Alphabet's stock is falling despite booming cloud growth

By Emily Bary and Christine Ji

Shares declined Thursday as Google's staggering $185 billion capital-expenditure forecast overshadowed a blowout fourth quarter

Alphabet expects 2026 capital expenditures to reach as high as $185 billion, nearly double the $91 billion spent over the course of 2025.

Even with monster cloud-revenue growth of 48%, Alphabet hasn't earned the benefit of the doubt around its rapidly rising artificial-intelligence spending.

At least that's what the stock's 3% Thursday morning decline would suggest. While numerous analysts said Alphabet $(GOOG)$ $(GOOGL)$ is a rare example of how AI spending can drive a serious financial uplift, investors seem skittish about the fact that the Google parent's capital expenditures could roughly double this year.

Alphabet forecast $175 billion to $185 billion in 2026 capital expenditures, far above the $116 billion consensus view and the $91 billion total recorded for 2025. On the earnings call, management said that overall expenses for 2026 are expected to "meaningfully increase" due to increased depreciation and energy costs of data centers.

Rosenblatt's Barton Crockett, one of the rare Wall Street analysts to rate Alphabet's stock at anything but the equivalent of a buy, wrote that the company's free cash flow could plunge more than 90% this year to around just $5 billion thanks to the "capex spike."

"This should put a capper, in our opinion, on blue-sky hopes for substantial multiple expansion," he wrote.

More: Alphabet's big beats aren't enough to lift the stock

Mizuho trading-desk analyst Jordan Klein has a more positive view of Alphabet's stock, although he thought the capex forecast struck investors as "scary."

Alphabet's stock has "been a massive outperformer, and some probably worry this could be a top or end badly," Klein wrote.

The Thursday morning decline in Alphabet shares comes after they led the "Magnificent Seven" in gains last year and for much of 2026 so far as well.

Also read: How Apple's stock has become a surprise winner during the $1.2 trillion tech wipeout

There's still reason for optimism, in Klein's view, as he noted that "no real large active fund manager" is selling Alphabet just because of the spending forecast.

Alphabet "is checking all the boxes of what investors want and need right now in terms of AI acceleration and consumption," he noted, while rival OpenAI is "fumbling around" with fundraising and the launch of its own advertising initiatives. Google Gemini crossed 750 million monthly active users in the fourth quarter, up from 650 million a quarter ago.

Bank of America analyst Justin Post defended the increase in capex, calling it "high ROI" in a Thursday note. Both Klein and Post highlighted that Alphabet can uniquely recognize cost advantages through its AI spending via the use of its own custom chips, known as tensor processing units. TPUs offer more bang for Alphabet's buck, in Klein's view. "No one else has this (yet)," he wrote, though admittedly Alphabet will also be spending money on Nvidia (NVDA) hardware.

"This differentiation could drive higher enterprise win rates, translating into cloud growth and profitability upside," Post wrote of Alphabet's proprietary infrastructure.

Additionally, Alphabet's initial investments could lead to lower costs down the road. On the earnings call, management stated that as Alphabet's AI platform scales, the costs of running Gemini are coming down already, saying that Gemini serving-unit costs declined by 78% in 2025 through model optimization, efficiency and utilization improvements.

Read: Why Alphabet and Meta investors shouldn't sweat ChatGPT's ad launch - for now

-Emily Bary -Christine Ji

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February 05, 2026 11:42 ET (16:42 GMT)

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