Alphabet stock slips after Google earnings as 2026 AI spending plan dominates the call

Alphabet shares fell Friday after a strong quarterly earnings beat was quickly eclipsed by a far bigger talking point: a sharply higher capital spending plan for 2026 aimed at expanding artificial intelligence infrastructure. The market’s reaction underscored a familiar tension in big tech right now—investors want AI growth, but they’re increasingly sensitive to how much cash it will take to build it.

As of 10:18 a.m. ET Friday, Feb. 6, Class C shares (GOOG) were $322.21 and Class A shares (GOOGL) were $321.86, both down just under 3% on the day. Broadcom (AVGO), a key supplier into AI infrastructure, moved the other way, up about 5%.

Google earnings: the beat was real, but capex stole the spotlight

Alphabet’s latest quarter came in ahead of expectations on both revenue and profit. Results were powered by continued strength in core advertising and accelerating demand for AI-related cloud services, with management also pointing to growing usage of its Gemini AI products.

The market, however, focused on what comes next: Alphabet outlined a 2026 capital expenditures range of $175 billion to $185 billion, roughly double its 2025 capex of about $91.45 billion. Management framed the step-up as necessary to meet surging compute demand tied to AI training and inference, expand data center capacity, and support both its cloud customers and consumer-facing AI features.

That spending outlook is large enough to reshape near-term expectations for free cash flow, depreciation, and margins—especially as investors compare AI buildouts across mega-cap peers.

Alphabet earnings details: cloud momentum and a heavy AI footprint

Alphabet posted $113.83 billion in quarterly revenue and $2.82 in earnings per share. Cloud was the standout, with revenue around $17.7 billion, up nearly 50% year over year, and management highlighting a cloud backlog of roughly $240 billion.

A weaker note came from YouTube advertising revenue, which fell short of some forecasts, reinforcing the idea that the ad business can still be uneven even as broader digital spending remains healthy.

From an “AI demand” perspective, the quarter signaled that Alphabet is converting model development into products people use. Management cited hundreds of millions of users for Gemini, while also emphasizing that enterprise customers are buying longer-term cloud capacity—one reason the company is pushing hard to expand infrastructure.

Google AI: why the stock can drop on good news

The “why is GOOG down?” question often comes down to one word: intensity—capital intensity.

Alphabet is effectively telling investors that the next phase of AI competition is less about software demos and more about industrial-scale buildout. Even with strong earnings today, a capex plan in the $175–$185 billion range implies:

• Higher near-term cash outflows and potentially slower growth in free cash flow

• Rising depreciation expense over the next several years

• More sensitivity to utilization rates, meaning the company needs demand to stay strong enough to keep expensive infrastructure productive

In other words, the quarter looked good, but the forward profile starts to resemble a heavier “build” cycle where returns may take time to show up in margins.

Broadcom stock rises as AI infrastructure spending ripples outward

Broadcom’s gain alongside Alphabet’s decline highlights how markets are slicing the AI trade into two parts: the builders and the beneficiaries.

Broadcom sells critical components for AI data centers—both in networking (moving data between accelerators) and in custom silicon programs used by hyperscalers. With Alphabet signaling a larger buildout, investors immediately looked for the “picks and shovels” that may see demand lift sooner than the platform owner’s cash returns.

That doesn’t mean Broadcom is risk-free. AI demand can be lumpy quarter to quarter, and valuations across the AI supply chain can swing quickly if customers slow orders or shift architectures. But in sessions like Friday, supplier leverage to capex headlines can be the simpler trade.

What to watch next: earnings follow-through and AI spending discipline

For Alphabet, the next question isn’t whether AI is driving demand—it is. The question is whether the company can show:

• Sustained cloud growth while keeping customer commitments and backlog converting into revenue

• Evidence of AI monetization in Search, YouTube, and enterprise products

• Spending discipline, including clearer timelines for when the capex ramp stabilizes

For Broadcom, focus will be on AI-related revenue growth, the durability of hyperscaler demand, and whether networking and custom chip programs continue to expand even as customers optimize costs.

The near-term setup is straightforward: Alphabet has to convince investors that today’s capex surge becomes tomorrow’s earnings power—while suppliers aim to prove that the AI buildout is still accelerating, not peaking.

Sources consulted: Investopedia; Investor’s Business Daily; Barron’s; Yahoo Finance