Alphabet is spending roughly $200 billion this year to build out its AI capacity, and Ruth Porat said the bill will be even more substantial next year.
Porat, Alphabet and Google's President and Chief Investment Officer, said Monday at Fortune's Most Powerful Women Summit in Santa Barbara, Calif., that capital expenditures are expected to 'increase significantly' next year. She said the company remains 'capacity constrained' as demand for compute grows.
'The demand for compute—because of the value that our partners are seeing in the enterprise, in governments, what we're seeing across our platform—suggests that we're in the buildout here now,' Porat told Fortune Editor-in-Chief Alyson Shontell. When asked whether the industry is near the peak of spending, she said, 'We do see this as an opportunity that extends for quite some time.'
Porat said Alphabet is focused on two things to earn an attractive return: 'One, what is the value that we add to partners so that you can actually deliver attractive revenue growth, and the other is how efficiently do we deliver that compute capacity.'
Wall Street has already shown its patience has limits. In July, Alphabet lifted its 2026 capex outlook to as much as $205 billion, and the stock dropped more than 6% the following day. Alphabet CFO Anat Ashkenazi said during the company's Q2 earnings call that capital expenditures hit $44.9 billion in the second quarter, 'with the vast majority of this spent in technical infrastructure to support our investments in AI.' That pushed free cash flow to negative $5.9 billion, the first time Alphabet's quarterly cash flow had dipped below zero in more than 20 years as a public company.
Even so, Google Cloud's revenue climbed 82% to $24.8 billion, while its operating profit more than tripled to $8.8 billion. Porat rejected a bearish view from Jefferies global head of equity strategy Chris Wood, who argued the AI boom will end in massive capital destruction in the U.S. as cheaper open-source Chinese models take market share.
Porat pointed instead to long-run discipline. 'The thing that is true throughout history is anything that is not built for the long run won't endure for the long run,' she said. 'You must invest for long-term growth. By the time you need it, it's too late.'
She also acknowledged resistance to data centers, saying about 71% of Americans don't want one built in their community. But she argued that opinion shifts when companies add energy capacity, protect affordability, and create local jobs. She pointed to Google's investments in nuclear, geothermal, solar, and wind, and to a Skilled Trades Alliance that Google cofounded with Ford, BlackRock, and Carhartt to train electricians, welders, and other workers the buildout needs.
The market has already voted on the scale of the wager: investors want proof that huge AI spending will convert into margins, free cash flow, and durable earnings. Alphabet is betting that capacity today becomes pricing power tomorrow. If Porat is right, capital wins. If not, the taxpayer-friendly rhetoric around jobs and infrastructure will not be enough to justify one of the largest corporate spending sprees ever.
