Amazon and Alphabet's Combined 2026 CapEx Could Reach $420B; Analyst Says Cloud Growth Justifies Spending
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The Motley Fool article analyzes whether Amazon and Alphabet's massive 2026 capital expenditures, projected at $220 billion and $195-205 billion respectively, are justified. Both companies are investing heavily in AI data centers to meet surging cloud computing demand. AWS revenue grew 37% year over year in Q2, with CEO Andy Jassy noting insufficient capacity to meet 2026 demand, a trend expected to continue into 2027. Google Cloud revenue grew even faster at 82% year over year, boosted by sales of custom AI chips. The author, Keithen Drury, notes that while neither stock is cheap, the investments appear to be paying off given the rapid growth rates. A hypothetical one-time dividend using the capex would have yielded $20.41 per Amazon share and $16.40 per Alphabet share.
Source report
Keithen Drury, The Motley Fool Wed, September 9, 2026 at 3:20 PM PDT | 4 min read
- GOOG
- AMZN
Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG, GOOGL) are the two biggest spenders in the data center space. For 2026, Amazon projects spending about $220 billion. Alphabet is slightly behind, giving investors a range of $195 billion to $205 billion. However, Alphabet has raised its guidance every quarter in 2026, so the actual figure may be much higher than the midpoint of $200 billion.
In reality, these two companies have nearly a blank check to bring as much computing capacity online as possible. But that represents a massive sum of money that could have been used for other purposes.
If Amazon and Alphabet had decided to pay investors a one-time dividend using that capital:
- Amazon shareholders could have received $20.41 per share
- Alphabet investors would have received $16.40 per share
That represents a significant percentage of their stock prices. But would that have made sense? Let's take a closer look.
Cloud Computing Is a Thriving Industry
Both Amazon and Alphabet have strong cloud computing businesses that require major investments to meet demand. At its core, cloud computing is a rental business. When demand for renting is high, new capacity must be brought online — and that is not cheap. However, over time, these investments often pay off, yielding many times the initial outlay.
The same logic applies to Amazon and Alphabet's spending on AI data centers, and so far, it appears to be paying off.
During the second quarter:
- Amazon Web Services (AWS) saw revenue growth accelerate to 37% year over year — its best growth in nearly five years. CEO Andy Jassy noted during the company's conference call that Amazon does not have enough computing capacity to meet demand in 2026. He predicts this trend will likely continue into 2027, and the company is already seeing demand for 2028.
- Google Cloud grew even faster, with revenue climbing 82% year over year. Google Cloud is a smaller business, generating $24.8 billion in Q2 versus AWS's $42.2 billion, which allows it to grow at a faster pace from a smaller base. Another factor boosting Alphabet's cloud division is the sale of its custom AI chips, which can deliver better performance at lower cost than traditional GPU computing when workloads are properly configured. Alphabet expects to sell a significant volume of these chips next year, providing another boost to its growth rate — potentially reaching triple digits.
Both companies are clearly growing at a rapid pace, justifying their investments. But does that make them good buys?
Amazon and Alphabet Aren't Cheap but Are Still Solid Buys
Neither stock is what I would consider cheap, but rarely do the best companies in the market trade at a discount.
Image source: Getty Images.
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