Google expects capital expenditure to hit $75 billion this year, with the majority going to data centers, servers, and networking.
That is more than Wall Street expected at $58bn, and significantly above 2024's $52.5bn capex spend.
On an earnings call, Alphabet CEO Sundar Pichai said: "We'll continue to invest in our Cloud business to ensure we can address the increase in customer demand."
Pichai also noted that over the last year, the company has broken ground on 11 data center regions in South Carolina, Indiana, Missouri, and around the world, adding: "We also announced plans for seven new subsea cable projects strengthening global connectivity."
While Google Cloud's revenue reached almost $12 billion for the quarter, up 30 percent, it came in below analyst expectations compiled by LSEG. They had expected a 32.2 percent increase to $12.16bn.
Google Cloud's operating income was $2.1bn, and the operating margin increased from 9.4 percent to 17.5 percent year over year.
Anat Ashkenazi, Alphabet's CFO, said: "Given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025."
Similarly to competitor Microsoft, whose quarterly results were released late last month, Google noted some capacity constraints as an issue. Ashkenazi said: "We exited the year with more demand than we had available capacity. So, we are in a tight supply-demand situation, working very hard to bring more capacity online. As I mentioned, we've increased investment in capex in 2024, continue to increase in 2025, and we'll bring more capacity throughout the year."
Following the earnings call, Alphabet's shares dropped eight percent in extended trading hours.
As in Microsoft's earnings call, analysts raised the topic of Chinese AI company DeepSeek's cheaply-trained model which caused tech shares to slump earlier this year and brought into question the massive amounts of investment that have gone into AI.
Pichai said of DeepSeek: "First of all, I think [they're] a tremendous team. I think they've done very, very good work." He went on to draw attention to Google's own models, which he said are "some of the most efficient models out there," as well as the company's "obsession with cost per query."
Pichai added: "I think part of the reason we are so excited about the AI opportunity is that we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down, which will make more use cases feasible. And that's the opportunity space. It's as big as it comes, and that's why you're seeing us invest to meet that moment."
Alphabet's overall revenue for the quarter was $96.5 billion, a 12 percent increase year over year, and for the whole year reached $350bn.
Microsoft expects capex to hit $80bn this year, while Meta will spend around $65bn. Amazon has yet to announce its capex forecast.
This year also saw the launch of Stargate, OpenAI's data center venture, which pledged to spend $100bn 'immediately.'
