Record Data Sheet
Microsoft and Alphabet are planning between $370 billion and $380 billion of capital expenditure in 2026, putting two of the world’s largest technology companies into a spending race centered on servers, data centers, networking equipment and computing capacity. At the midpoint of Alphabet’s current guidance, the two companies are planning approximately $375 billion of CapEx for the year. The combined figure is calculated from the companies’ individual guidance, not a figure reported jointly by either company.
2026 Capital Expenditure
| Microsoft | Alphabet | |
|---|---|---|
| 2026 CapEx | ~$175B | $195-205B |
| Midpoint | ~$175B | $200B |
| Latest quarterly CapEx | $41B | $44.9B |
Combined 2026 CapEx at Alphabet’s midpoint: approximately $375B
Alphabet’s midpoint is approximately $25 billion above Microsoft’s current calendar 2026 expectation. At the upper end of Alphabet’s range, the difference reaches approximately $30 billion.
Microsoft: Approximately $175 Billion
Microsoft expects calendar 2026 capital expenditure to reach approximately $175 billion. The company said its underlying calendar 2026 investment expectation remained unchanged, but a change in the estimated useful life of its data centers and office buildings, from 15 to 25 years, changes the classification of some future data center leases from finance leases to operating leases. Finance leases are included in CapEx while operating leases are not, bringing the reported calendar 2026 expectation to approximately $175 billion.
Microsoft’s latest quarterly CapEx was $41 billion. Roughly two thirds went to short lived assets, primarily CPUs and GPUs, while the remaining spending went to long lived assets. Finance leases totaled $5.6 billion during the quarter and were primarily related to large data center sites. Cash paid for property and equipment was $35.8 billion.
The company added 31 new data centers across five continents during the quarter, bringing the total added during the fiscal year to 88. Microsoft also added another gigawatt of capacity during the quarter and said it remains on track to roughly double its overall capacity in two years.
What Microsoft Is Buying
Microsoft’s latest quarterly disclosure gives a relatively detailed view of the composition of its spending.
| Microsoft Q4 FY2026 CapEx | Share |
|---|---|
| Short lived assets, primarily CPUs and GPUs | ~67% |
| Long lived assets | ~33% |
| Total | 100% |
Microsoft is also trying to increase the output generated by infrastructure already in service. The company said it reduced dock to live times for new GPUs in its largest regions by nearly 50% during the fiscal year and increased throughput for Copilot workloads fourfold since the start of the year.
Azure and other cloud services revenue grew 43% in Microsoft’s latest quarter. Microsoft said customer demand continued to exceed available capacity and that additional in quarter Azure capacity was quickly monetized. The company attributed part of the revenue performance to efficiency gains across its CPU and GPU fleet and improvements that enabled earlier delivery of new capacity.
Alphabet: $195-205 Billion
Alphabet has raised its 2026 capital expenditure guidance to between $195 billion and $205 billion, from its previous range of $180 billion to $190 billion. The company said the increase was primarily due to accelerating the delivery of capacity to meet growing demand.
Alphabet spent $44.9 billion on CapEx in the second quarter and $80.6 billion during the first half of 2026. The vast majority of the second quarter spending went into technical infrastructure.
What Alphabet Is Buying
Alphabet provided a specific breakdown of its technical infrastructure investment for the quarter.
| Alphabet Q2 2026 Technical Infrastructure | Share |
|---|---|
| Servers | ~60% |
| Data centers and networking equipment | ~40% |
| Total | 100% |
Alphabet’s technical infrastructure includes servers and network equipment for computing, storage and networking, as well as data center land and building construction.
The company said the increase in infrastructure investment is putting pressure on the income statement through higher depreciation and data center operating costs, including energy. Alphabet also expects free cash flow to remain under pressure because of its investment in technical infrastructure.
At the same time, Google Cloud revenue increased 82% year over year to $24.8 billion in the second quarter. Cloud operating income reached $8.8 billion and Cloud operating margin increased to 35.6%, compared with 20.7% in the same quarter a year earlier.
Google Cloud’s backlog reached $514 billion, an increase of more than $50 billion during the quarter. Alphabet expects to recognize just over 50% of the total backlog as revenue over the following 24 months.
The Two Spending Plans
The headline numbers are close in scale, but the companies disclose the composition of their investments differently.
Microsoft classifies much of its latest spending according to the expected life of the assets, with approximately two thirds of quarterly CapEx going to short lived assets, primarily CPUs and GPUs.
Alphabet separates its technical infrastructure investment between servers and data centers and networking, with a 60% to 40% split in the latest quarter.
The percentages should therefore not be treated as identical accounting categories. They describe broadly similar infrastructure spending through different reporting frameworks.
$375 Billion at a Glance
| 2026 planned CapEx | Amount |
|---|---|
| Microsoft | ~$175B |
| Alphabet midpoint | $200B |
| Combined midpoint | ~$375B |
| Alphabet upper range | $205B |
| Combined upper range | ~$380B |
The midpoint is used only for comparison. Alphabet’s official 2026 guidance remains a range of $195 billion to $205 billion.
What Is the Investment Producing?
For a CFO, the size of the investment is only one part of the calculation. The more relevant question is what the additional infrastructure is producing in revenue, margins, contracted business and cash flow.
Neither company publishes a directly comparable return on invested CapEx figure. Dividing quarterly Cloud revenue by quarterly company wide CapEx would therefore not represent an actual return on investment.
The companies do disclose several measures that show how the infrastructure is being monetized.
Microsoft reported $59.3 billion of Microsoft Cloud revenue in its latest quarter, up 27% year over year. For the full fiscal year, Microsoft Cloud revenue surpassed $214 billion. Azure surpassed $100 billion in annual revenue and Azure and other cloud services revenue grew 43% in the latest quarter.
Microsoft also reported commercial remaining performance obligations of $678 billion, up 84% year over year. Approximately 30% of that amount is expected to be recognized as revenue over the following 12 months.
Alphabet reported $24.8 billion of Google Cloud revenue in the second quarter, up 82% year over year. Cloud operating income reached $8.8 billion, while Cloud operating margin increased to 35.6%. Its Cloud backlog reached $514 billion, with just over half expected to be recognized as revenue during the next 24 months.
Capital Efficiency Indicators
| Metric | Microsoft | Alphabet |
|---|---|---|
| 2026 CapEx | ~$175B | $195-205B |
| Latest quarterly CapEx | $41B | $44.9B |
| Latest quarterly operating cash flow | $55.4B | $39.1B |
| Latest quarterly free cash flow | $19.6B | -$5.9B |
| Latest Cloud revenue | $59.3B | $24.8B |
| Cloud revenue growth | 27% | 82% |
| Backlog / RPO | $678B | $514B |
These figures should not be interpreted as a direct ROI comparison. Microsoft and Alphabet have different business mixes and disclose their infrastructure investments differently.
Which Investment Is Better Optimized?
The available company disclosures do not support a definitive ranking of the two CapEx programs by return. They do provide evidence of different forms of capital efficiency.
Microsoft reported that additional Azure capacity was quickly monetized and that efficiency gains across its CPU and GPU fleet helped support revenue growth. The company generated $55.4 billion of operating cash flow and $19.6 billion of free cash flow in its latest quarter despite $41 billion of CapEx.
Alphabet reported 82% year over year growth in Google Cloud revenue, a Cloud operating margin of 35.6% and a Cloud backlog of $514 billion. At the same time, Alphabet generated $39.1 billion of operating cash flow in the quarter and negative free cash flow of $5.9 billion, driven by its investment in CapEx.
There is no company reported metric that allows the two investment programs to be reduced to a single comparable return figure. The more useful comparison is the relationship between additional capacity, revenue growth, operating margin, contracted revenue and free cash flow.
The Cash Flow Cost
The scale of the investment is already visible in cash generation.
Microsoft generated $55.4 billion of operating cash flow in its latest quarter and $19.6 billion of free cash flow after $41 billion of capital expenditure. Microsoft said it expects to remain free cash flow positive in fiscal 2027 even as capital expenditure increases year over year.
Alphabet generated $39.1 billion of operating cash flow in the second quarter. Free cash flow was negative $5.9 billion, driven by its investment in CapEx. Alphabet said free cash flow would remain under pressure as it continues investing in technical infrastructure.
The Spending Continues
Neither company is presenting 2026 as the end of the investment cycle.
Microsoft expects fiscal 2027 capital expenditure to increase year over year given demand signals across its portfolio. The company also expects to remain free cash flow positive in fiscal 2027.
Alphabet expects its 2027 CapEx to increase significantly from 2026. The company said demand continues to exceed the capacity being added and that it intends to continue investing while it sees attractive returns from additional capacity.
The Budget War
Microsoft and Alphabet are approaching $400 billion of combined annual capital expenditure without reporting the same investment profile.
Microsoft’s approximately $175 billion plan is accompanied by 43% growth in Azure and other cloud services revenue, $678 billion of commercial remaining performance obligations, rapid monetization of newly added Azure capacity and positive free cash flow in the latest quarter.
Alphabet’s $195-205 billion plan is accompanied by 82% Google Cloud revenue growth, a 35.6% Cloud operating margin, a $514 billion Cloud backlog and negative quarterly free cash flow driven by its infrastructure investment.
For a CFO, the important question is therefore not simply which company spends more. It is how much additional capacity each company can turn into contracted revenue, how quickly that capacity becomes productive, what margin it produces and how much cash remains after the investment.
The public disclosures show two companies continuing to increase infrastructure spending while reporting strong demand for the capacity being built. The next figures to watch are the relationship between additional CapEx, incremental revenue, operating margin and free cash flow.
2026 Capital Expenditure
| 2026 | Microsoft | Alphabet |
|---|---|---|
| Planned CapEx | ~$175B | $195-205B |
| Midpoint | ~$175B | $200B |
| Latest quarterly CapEx | $41B | $44.9B |
| Combined midpoint | ~$375B | |
| Combined upper range | ~$380B |
The combined figures are calculated from the individual company guidance and are not figures reported jointly by Microsoft and Alphabet.
Sources
Microsoft Investor Relations Microsoft Fiscal Year 2026 Fourth Quarter Earnings Conference Call
Alphabet Investor Relations Alphabet 2026 Q2 Earnings Call, Alphabet Investor Relations, FAQs and General Information