Alphabet Raises AI Spending Outlook as Pichai Flags Gemini Coding Gap

Alphabet, Google’s parent, is pouring money into data centers, chips and cloud capacity as it races OpenAI and Anthropic to supply generative AI. The spending matters because booming enterprise demand is lifting Google Cloud, yet investors remain focused on whether infrastructure outlays can deliver durable returns and keep Gemini at the model frontier. Those concerns have intensified after Google delayed Gemini 3.5 Pro beyond its planned June release, exposing a perceived weakness in coding tools.

Alphabet said on July 22 that second-quarter 2026 Google Cloud revenue jumped 82% to $24.8 billion, while total revenue reached $119.8 billion. CFO Anat Ashkenazi raised the 2026 capital-spending forecast by $15 billion to $195 billion-$205 billion from $180 billion-$190 billion, saying demand still exceeded capacity. CEO Sundar Pichai acknowledged Gemini needed improvement in coding and agentic coding. The shares fell nearly 5% in extended trading; adjusted EPS of $2.85 also missed the $2.89 consensus.