By Dan Gallagher
The motto for the artificial-intelligence race today should be if you've got it, spend it.
That is a message that Meta Platforms took to heart during its fourth-quarter report last week, when the Facebook and Instagram parent announced plans to spend up to $135 billion on capital expenditures this year, compared with about $72 billion last year. Google managed to up the ante Wednesday with its own plan to spend as much as $185 billion this year, which would be about double last year's outlay.
Google's annual revenue has now topped $400 billion, about twice as large as Meta's. Still, that new spending target, even for a company that has been firing on all cylinders lately, takes one's breath away. The stock price of Google's parent, Alphabet, slipped in after-hours trading Wednesday after its fourth-quarter report and conference call.
Google has both the political and financial capital to lay such a bet. The company's Gemini 3 model has put it on top of the heap of performance for AI models, while the unmatched distribution of its search engine and products like Gmail have quickly driven adoption. Google said Wednesday it has more than 750 million monthly active users just on its Gemini App, which only represents a portion of Gemini's actual users.
The strong reception of Gemini, along with Google's victory over the federal government's efforts to break up the company, have cheered investors when sentiment on technology and AI is faltering. Alphabet's stock price has jumped around 20% in the past three months. Nvidia, Microsoft, Amazon.com and Broadcom have all lost ground during that time.
But actual capital matters too. And here is where Google's business model pays off the most. The company's advertising arm has long been a lucrative cash cow that is still managing double-digit growth rates. That growth has actually accelerated, with ad revenue up 14% in the fourth quarter, compared with 13% in the previous one. The company's cloud-computing division was even more impressive, with revenue jumping 48% year over year to hit $17.7 billion. Google Cloud hasn't seen growth like that since early 2021, when the business was less than a third of its current size.
Google Cloud turned in a record $5.3 billion in operating profit in the latest quarter -- a figure that was 45% higher than Wall Street's targets. The company's booming businesses produced nearly $165 billion in operating cash flow in 2025, the highest in the S&P 500, according to data from S&P Global Market Intelligence.
These strong results will help investors digest the latest investment plan. But spending what could be 40% of annual revenue on AI chips and related infrastructure is still a sizable gamble. Such investments will sharply elevate depreciation charges, which in the latest quarter reduced net income by 18%. And Google isn't the bargain it was less than a year ago, when breakup fears had the stock trading at less than 16 times projected earnings.
That multiple has nearly doubled since. And that comes as the market is growing more worried about how AI will disrupt established tech players -- including many cloud software providers that are major customers of Google, Microsoft and Amazon. Google's own business is clicking well. But the interconnected nature of that business means it can't exactly stand alone.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
February 05, 2026 05:30 ET (10:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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