Google Cloud Chief Says Customers Are Spending 50% Above Contract Minimums as Alphabet Hikes 2026 Capex to $205 Billion

Alphabet's cloud unit just posted numbers that caught industry attention, and the man running it says the growth isn't slowing down.

Google Cloud CEO Thomas Kurian told CNBC's Jim Cramer on Thursday that existing customers are spending roughly 50% more than what they originally committed to under contract. That overspend is a core reason cloud revenue jumped 82% year-over-year in the second quarter, part of the results Alphabet reported Wednesday that beat Wall Street's revenue expectations.

"Our existing customers have increased their spend when they make a commitment to us," Kurian said. He attributed it to Google's product lineup, its sales execution, and said it shows up in both top-line revenue and operating income.

Demand Outstripping Capacity

The growth is strong enough that Google now plans to rent capacity from third-party cloud providers to keep up. That news lifted shares of neocloud players CoreWeave and Nebius, companies that specialize in renting out GPU infrastructure to firms like Google that can't build data centers fast enough on their own.

Kurian acknowledged the move will hurt margins in the near term. He said it's worth it anyway.

"So for us, when we look at the short term, we're going to rent some capacity for you know a few quarters," Kurian said. "It allows us to bring customers in, bridge them over to when we have sufficient capacity available, and then that will compound over time, and the return on investment makes sense for us."

That's a bet that today's margin hit buys tomorrow's locked-in customer. Whether that math works depends entirely on whether AI workloads keep growing at this pace, or whether this is the top of a spending cycle that eventually corrects.

The Market Didn't Buy the Optimism

Alphabet shares fell more than 7% on Thursday, even after beating revenue expectations and posting an 82% jump in cloud growth. The stock drop wasn't about disappointing results. It was about the forecast.

Alphabet told investors it now expects to spend between $195 billion and $205 billion in 2026 on capital expenditures, up from the $180 billion to $190 billion range the company had guided to just one quarter earlier. Second-quarter capex alone hit $44.9 billion, with the bulk going to AI infrastructure, according to CNBC.

Wall Street reacted to the guidance increase like a warning sign, not a growth story. Investors who watched Alphabet beat revenue estimates still sold the stock on the same day, a sign the market is genuinely split on whether this spending will pay off or just burn cash.

Before Alphabet's earnings, tech's megacap players were projected to spend roughly $725 billion combined on AI initiatives this year. That figure will almost certainly climb higher once Amazon, Microsoft and Meta report their own results next week, all three of which are also pouring money into AI data centers and chips.

Kurian's Defense

Kurian pushed back on the idea that Google is overspending, calling the company's capex approach "very, very disciplined" and pointing to customers who are already seeing returns.

He cited Macy's, saying the retailer has seen an increase in shopping basket size after deploying Google's AI systems. He also pointed to Macquarie Bank, saying it has saved significant processing time by automating workflows with Google's AI tools.

Those are two named, concrete examples, which is more than most AI vendors offer when defending nine-figure infrastructure bets. But two customer anecdotes from a company with a global cloud business are not proof that a $205 billion annual spend is paying for itself. The verdict depends on how the rest of Alphabet's AI customer base performs, and on whether the broader AI infrastructure race turns into durable revenue or an expensive arms race with diminishing returns.

The unresolved question heading into next week: when Amazon, Microsoft and Meta report earnings, will they also raise their own capex guidance the way Alphabet just did, and will their stocks take the same kind of hit if they do. If all four mega-cap tech companies are simultaneously ratcheting up AI spending while Wall Street punishes each one for it, that's a signal the market's patience with the AI buildout has limits, no matter how strong the underlying cloud growth numbers look.