Google CEO Sundar Pichai gestures to the crowd during Google’s annual I/O developer conference on May 20, 2025 in Mountain View, California.
David Paul Morris | Bloomberg | Getty Images
As alphabet Although the company is returning to the debt market to finance its artificial intelligence expansion, it acknowledges new risks associated with the rise of AI and its heavy investments in infrastructure.
In its annual financial report late last week, Google parent company highlighted the potential impact of AI on the company’s core advertising business and the possibility of “excess capacity” arising from its costly commitments.
“To meet the computing capacity needs of AI training and inference as well as traditional cloud computing services, we enter into large leasing arrangements with third-party operators, which may increase costs and operational complexity,” the company said in the SEC filing. Large commercial agreements could also “increase the liabilities and obligations in the event of non-performance by us, our counterparties or suppliers,” Alphabet said.
One of the headlines in Alphabet’s earnings report was $185 billion. This represents the high end of what the company says it will spend in capital expenditures this year, more than double its 2025 capital expenditures.
To fund its AI ambitions, Alphabet plans to raise $20 billion from the sale of U.S. dollar bonds, according to people familiar with the matter who asked not to be identified because the details are confidential. The proposed sale would take place in four tranches, including a 100-year sterling bond, the people said, with one adding that the deal was five times oversubscribed.
Bloomberg first reported on the planned debt financing, which was originally expected to reach $15 billion.
Alphabet conducted a $25 billion bond sale in November. Its long-term debt quadrupled to $46.5 billion in 2025. CFO Anat Ashkenazi said in last week’s earnings call that when looking at its overall investments, the company “wants to make sure that we do this in a fiscally responsible way and invest appropriately, but we do it in a way that maintains a very healthy financial position for the organization.”
When asked what keeps executives awake at night, CEO Sundar Pichai replied: “compute capacity,” adding: “Power, land, supply chain constraints, how can you meet this extraordinary need for this moment?”
Overall, alphabet, Microsoft, Meta And Amazon Capital spending is now expected to rise more than 60% this year from historical 2025 levels as it buys high-priced chips, builds new facilities and buys the networking technology to connect everything.
At the center of Google’s AI strategy is Gemini, its large language model and AI assistant that competes with offerings from OpenAI and Anthropic’s Claude.
Pichai said on the earnings call that the Gemini AI app now has more than 750 million monthly active users, up from 650 million monthly active users last quarter.
As more consumers adopt generative AI, Google must confront the potential for people to reduce their use of internet searches, leading to possible changes in the company’s dominant advertising business. It’s another thing Google has included in the risk sections of its financial filings for the first time.
“We and our competitors are continually adapting to this change and offering new and evolving advertising formats,” the filing states. “There is no guarantee that we will adapt effectively and competitively to this change and that such advertising formats, strategies and offerings will be successful.”
So far, Google has been able to fend off concerns that AI could cannibalize its search and advertising businesses. Advertising revenue rose 13.5% year-over-year to $82.28 billion in the fourth quarter.
—CNBC’s Seema Mody contributed to this report.
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