Google CEO Sundar Pichai gestures to the audience at Google’s annual I/O developer conference on May 20, 2025 in Mountain View, California.
David Paul Morris | Bloomberg | Getty Images
as alphabet The company is returning to the bond market to fund its artificial intelligence buildout, but the company recognizes new risks associated with the rise of AI and heavy investments in infrastructure.
In its annual financial report late last week, Google’s parent company highlighted the potential impact of AI on its core advertising business and how the costly effort could ultimately result in “excess capacity.”
“To meet the demand for computing power for AI training and inference, as well as traditional cloud computing services, we enter into significant lease agreements with third-party operators, which can increase cost and operational complexity,” the company said in an SEC filing. Large commercial contracts can also increase “liabilities and obligations in the event of nonperformance by us, our counterparties, and our vendors,” Alphabet said.
One of the headline numbers in Alphabet’s earnings report is $185 billion, which represents the maximum amount the company says it could spend on capital expenditures this year and more than double its 2025 capital expenditures.
To fund its AI ambitions, Alphabet plans to raise $20 billion by selling U.S. dollar bonds, according to people familiar with the matter who asked not to be identified because the details are confidential. The planned sale will be in four parts, including a 100-year British pound bond deal, the people said, adding that the deal is five times oversubscribed.
Bloomberg first reported on the debt financing plan, which was initially expected to reach $15 billion.
Alphabet conducted a $25 billion bond sale in November. Long-term debt will quadruple to $46.5 billion in 2025. CFO Anat Ashkenazi said on an earnings call last week that when the company considers its total investment, “we want to make sure we invest appropriately in a fiscally responsible manner, but we do so in a way that maintains a very healthy financial position for the organization.”
When asked on a conference call what’s keeping executives up at night, CEO Sundar Pichai said “computing power,” adding: “Power, land, supply chain constraints, how do we ramp up to meet this extraordinary demand right now?”
In total, the alphabet microsoft, meta and Amazon Capital spending this year is expected to increase more than 60% from historic levels reached in 2025, as companies now load up on expensive chips, build new facilities and buy network technology to connect everything.
At the heart of Google’s AI strategy is its large-scale language model and AI assistant, Gemini, which goes head-to-head with OpenAI’s products 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 in the previous quarter.
As more consumers adopt generative AI, Google must face the possibility that people will use less internet search. This could mean changes to the company’s core advertising business. This is also the first time Google has included this as a risk item in its financial statements.
“We and our competitors are constantly adjusting to respond to this change and offer new and evolving ad formats,” the filing states. “There can be no assurance that we will be able to adapt effectively and competitively to these changes, or that any such advertising formats, strategies or services will be successful.”
So far, Google has been able to fend off concerns that AI could cannibalize its search and advertising businesses. Advertising revenue for the fourth quarter was $82.28 billion, an increase of 13.5% from the same period last year.
—CNBC’s Seema Mody contributed to this report.
Attention: It’s clear that Google has a very high return on capital investment
