Alphabet Halts Stock Buybacks to Fund $205 Billion AI Bet

Alphabet will spend up to $205 billion on AI infrastructure this year, and it can no longer cover that from its own cash. Chief financial officer Anat Ashkenazi told analysts on Wednesday that Google’s parent company is raising its full year 2026 capital spending guidance to a range of $195 billion to $205 billion, up from $180 billion to $190 billion just three months earlier.

To cover it, Alphabet stopped buying back its own stock this quarter and instead raised close to $70 billion in fresh equity and debt, a reversal for a company that has spent the past decade handing cash back to shareholders rather than asking markets for more of it.

Alphabet’s AI Budget Jumps to $205 Billion

Ashkenazi said the increase is “primarily due to an acceleration in the delivery of capacity to meet growing demand,” not a change in Alphabet’s underlying demand outlook. Alphabet lifted its 2026 capex guidance to $205 billion at the top end, according to its own earnings release filed with regulators.

Alphabet spent $44.9 billion on capex in the second quarter alone, double what it spent a year earlier. Through the first six months of 2026 the company had already laid out $78.6 billion, leaving roughly $116 billion to $126 billion still to spend in the back half of the year to hit the new range.

Roughly 60% of that technical infrastructure spending goes to servers, including Alphabet’s own Tensor Processing Units, with the remaining 40% split between data centers and networking gear. That ratio has held steady all year.

Alphabet’s capital spending has climbed every year since 2023, but this year’s jump dwarfs the others.

Analysts polled by Visible Alpha had modeled around $188 billion for the year, below even the low end of the new range. That gap is why the update rattled a stock that had otherwise cheered a strong quarter.

Why Did Alphabet Stop Buying Back Its Own Stock?

Alphabet funded the increase by tapping capital markets instead of its balance sheet. It halted stock buybacks this quarter, raised $49.6 billion through common and preferred stock in June, added $20.3 billion in senior notes, and posted negative free cash flow, a sign the AI buildout has outrun even Alphabet’s own cash generation.

Free cash flow for the quarter came in at negative $5.9 billion, according to the company’s earnings release, a sharp break from the large positive numbers Alphabet has reported for most of the past decade. The company still holds $242.5 billion in cash and marketable securities, so the shortfall is not a liquidity problem. It is a statement about where AI spending now sits against Alphabet’s old habit of returning cash to shareholders.

The $70 billion raised this quarter broke down into several pieces:

• $20.5 billion from a public offering of 29 million Class A shares and 29 million Class C shares
• $10 billion from a private placement of stock to a Berkshire Hathaway affiliate
• Roughly $19 billion from mandatory convertible preferred stock paying a 6.25% dividend
• $20.3 billion from senior unsecured notes sold during the quarter

Goldman Sachs, JPMorgan and Morgan Stanley ran the stock and preferred offerings as joint bookrunners, according to Alphabet’s quarterly filing detailing the June share sale. A separate analysis by FourWeekMBA of the same investor release found stock buybacks, $13.2 billion in the second quarter of 2025, fell to zero in the same quarter this year.

Berkshire Hathaway Buys Into the Buildout

Ten billion dollars of that equity raise came from Berkshire Hathaway, Warren Buffett’s conglomerate, which agreed on June 1 to buy $5 billion of Class A stock at $351.81 a share and $5 billion of Class C stock at $348.20 a share in a private placement that closed alongside the public offering.

The purchase extended a stake Berkshire has been building since the third quarter of 2025, under incoming chief executive Greg Abel. It followed Berkshire’s $10 billion commitment to Alphabet’s AI build-out and now rides on a Google Cloud backlog that has grown far larger since that bet was placed, deepening Berkshire’s expanding position in Alphabet’s cloud business.

Google Cloud’s Backlog Swells Past $514 Billion

Google Cloud revenue rose 82% to $24.8 billion in the quarter, the division’s fastest growth in years, driven by enterprise demand for AI infrastructure and core cloud services. Cloud’s backlog, contracted revenue not yet booked as sales, grew by more than $50 billion since the first quarter to $514 billion by the end of June.

Cloud’s operating margin more than tripled from a year earlier to 35.6%, though management does not expect that pace to hold through the third quarter.

Ashkenazi told analysts Alphabet will lean more heavily on outside cloud capacity in the third quarter as a bridge while its own data centers and servers catch up to demand. “Given the supply-constrained environment, we plan to expand the use of third-party capacity in Q3 as a bridging strategy while we build out more internal capacity,” she said, adding that the arrangement will create modest margin pressure on Cloud in the near term.

• What we know: Alphabet is expanding its use of third-party cloud capacity in the third quarter to serve customers while internal data centers and servers ramp up.
• What we know: Ashkenazi has said the arrangement will pressure Google Cloud’s operating margin in the near term but is meant to keep the customer base growing.

• What’s unconfirmed: Which outside providers Alphabet will lean on for that extra capacity.
• What’s unconfirmed: How long the bridging arrangement will run or exactly how much margin it will cost Cloud.

The Hyperscaler Arms Race Gets Even More Expensive

Alphabet is not spending alone. Based on each company’s most recent public guidance, Amazon has pointed to roughly $200 billion in 2026 capital spending, Microsoft has tracked toward about $145 billion on an annualized basis, and Meta has guided to $115 billion to $135 billion.

Those peer figures predate Alphabet’s latest increase. Even before it, the four companies’ 2026 plans were already pointing toward combined hyperscaler capex climbing toward $725 billion, up 77% from about $410 billion in 2025 and roughly triple the $226 billion the group spent together in 2024.

Investors Are Not Convinced Yet

Alphabet shares fell nearly 5% in after-hours trading once Ashkenazi confirmed the new capex figure, even though the company beat estimates across the board. Revenue reached $119.8 billion for the quarter, up 24% year over year, and diluted earnings per share rose to $9.11, helped in part by a $99 billion gain on the company’s equity investments.

It feels like we are in very early innings of what feels like secular shift across multiple areas.

Sundar Pichai, Alphabet’s chief executive, told analysts the size and timing of returns from the AI buildout look better now than they did a year ago, pointing to early gains across search, enterprise and agentic products.

Ashkenazi went further, telling analysts to expect capital spending to increase significantly again in 2027, without naming a figure. That forward guidance underpins the decade-long bull case for Alphabet stock. Buybacks still sit at zero and free cash flow is still negative at a company that spent a decade proving it could deliver plenty of both.

Alphabet has not put a number on 2027 yet. Ashkenazi’s only promise: it will be bigger than this year’s record.

Frequently Asked Questions

How much is Alphabet spending on AI infrastructure in 2026?

Alphabet’s board approved a range of $195 billion to $205 billion for 2026 capital expenditures, up from $180 billion to $190 billion three months earlier. The midpoint of that range is roughly six times what the company spent in 2023, when annual capex was $32.3 billion.

What is mandatory convertible preferred stock?

It is a hybrid security that pays a fixed dividend, 6.25% in Alphabet’s case, and automatically converts into common shares on a set future date. Alphabet issued 385 million depositary shares representing 19 million preferred shares in June 2026 as part of its equity raise, giving the company cash immediately while committing to issue common stock later.

How much did Berkshire Hathaway invest in Alphabet’s June offering?

Berkshire Hathaway bought $10 billion of stock in a private placement that closed June 4, 2026, split evenly between $5 billion of Class A shares at $351.81 each and $5 billion of Class C shares at $348.20 each. The purchase added to a stake Berkshire has built since the third quarter of 2025.

Why did Alphabet’s free cash flow turn negative?

Free cash flow subtracts capital spending from operating cash flow, and Alphabet’s capex outgrew its cash generation for the quarter. The company still ended the period with $242.5 billion in cash and marketable securities, so the negative figure reflects construction timing rather than a shortage of cash.

How does Alphabet’s spending compare with Amazon, Microsoft and Meta?

Based on each company’s most recent public guidance, Amazon is planning about $200 billion, Microsoft is tracking near $145 billion, and Meta has guided $115 billion to $135 billion for 2026. Industry analysts tracking hyperscaler spending now expect combined big tech capital expenditures to top $1 trillion in 2027.

Will Alphabet’s capital spending keep rising in 2027?

Yes. Ashkenazi told analysts on the July 22 earnings call that 2027 capital expenditures will increase significantly from 2026 levels, without giving a specific figure. She tied the continued increase to sustained demand from external cloud customers and Alphabet’s own AI products.