Alphabet Raises Capital Expenditure Guidance for 2026
Alphabet has raised its capital expenditure guidance for 2026 to a range of $195 billion to $205 billion, up from the previous estimate. The company spent $44.9 billion on capex in Q2 alone and reported negative free cash flow of $5.9 billion during that period. Much of this spending is directed toward servers (about 60%) and data centers/networking equipment (the remaining 40%). While these expenditures haven't yet impacted Alphabet's income statement, they will begin to show up as depreciation expenses starting in 2027. Depreciation for the $120 billion spent on servers this year is expected to amount to roughly $20 billion annually over six years. Data centers are depreciated over a longer period—up to 40 years—which results in smaller annual charges but extends their impact further into the future. CFO Anat Ashkenazi noted that infrastructure spending will continue to pressure Alphabet's profit and loss statement through higher depreciation costs, though this is being offset by strong revenue growth. Alphabet’s operating income for Q2 was $40.8 billion, meaning server-related depreciation from 2026 alone could subtract about half of a quarter's earnings annually over the next six years. Despite these pressures, investors are tolerating the spending due to its contribution to Alphabet's ongoing revenue growth.
Topics: Alphabet Financials Capital Expenditures Depreciation Accounting