Alphabet's Google Cloud Soars Amid Record-Breaking Capex Bet

Alphabet's second-quarter performance has been overshadowed by its plan to raise capital expenditures (capex) to up to $205 billion this year, a significant increase from its original outlook of $180 billion to $190 billion. Despite this, the company's Google Cloud revenue grew 82% year over year in the 2026 second quarter.

According to Alphabet CEO Sundar Pichai, management believes that its spending delivers an attractive return on investment (ROI) and would not be spending this way otherwise. However, it will take time for the spend to begin producing results, with the company already warning investors that the capex spend is likely to increase again next year.

Pichai emphasized that the AI business 'looks like extraordinary opportunities with extraordinary returns' and that executing well on these opportunities would be highly rewarding. This is in line with Warren Buffett's views, as Berkshire Hathaway has become a huge Alphabet fan and it's now Berkshire's third-largest position, tied with Coca-Cola.