Alphabet Will Spend as Much as $205 Billion This Year. The Depreciation Bill Starts Landing in 2027.

Alphabet (GOOGL) raised its 2026 capital expenditure guidance to $195-205 billion, marking one of the largest corporate spending commitments in tech history. Approximately 60% of that outlay—roughly $120 billion—will fund servers that depreciate over six years, translating to an additional $20 billion in annual depreciation expense hitting the income statement starting in 2027.

The spending ramp comes as the company reports strong momentum: overall revenue grew 24% while Google Cloud posted 82% growth and tripled its operating income. The cloud unit's acceleration suggests the massive infrastructure investment is already generating returns that currently outpace the looming depreciation charges.

The 2027 depreciation inflection represents a structural shift in Alphabet's earnings profile. While the company is betting that AI-driven revenue growth will absorb the expense, the $20 billion annual hit will materially compress margins if growth rates decelerate or if utilization disappoints.