A tale of two capex increases: Why investors are responding to Google and Meta so differently

When Alphabet and Meta reported first-quarter earnings on Wednesday, both exceeded already high expectations on revenue and profit — and both said their already massive AI spending will climb even higher. The Google parent raised its 2026 capital expenditure outlook to between $180 billion and $190 billion, up from $175 billion to $185 billion. Meta, meanwhile, increased its 2026 capex forecast even more, up to $125 billion to $145 billion, from $115 billion to $135 billion.

Investors reacted very differently: Alphabet shares are up about 6% premarket, while Meta has fallen roughly 9%.

So, why the different reactions? While there are a number of reasons — Google’s earnings beat was better — perhaps it’s best illustrated by their approach to AI infrastructure: Google is not only making high-end Tensor Processing Unit AI chips for internal use, but it also confirmed that it will begin delivering those chips to other companies this year, in what analysts have estimated could be a $900 billion business. Meta is reportedly already among its customers.

In other words, Google is positioning itself to profit from the broader AI ecosystem, including its rivals. Meta, meanwhile, is building inference-optimized chips primarily to lower its own costs. While Meta remains largely a renter of infrastructure, Google is becoming a landlord.

Nowhere is that clearer than in Google Cloud, where revenue grew 63% to over $20 billion last quarter, providing a massive engine to offset its infrastructure bills — a luxury that Meta’s business model lacks.

Although Meta has been angling for new revenue sources, one of its most promising paths was recently destroyed, thanks to the Chinese government blocking its acquisition of AI agent startup Manus. And while its own advertising business is surging thanks to AI, it’s less clear if that ad bump alone can justify its massive $145 billion infrastructure bill.

When Morgan Stanley's Brian Nowak asked which signposts Meta is watching to ensure Return on Invested Capital, Meta CEO Mark Zuckerberg demurred.

“That’s a very technical question,” he said, before continuing.

“The things that we’re watching are to make sure that we’re on track building leading models and leading products,” Zuckerberg said. “The formula for our company has always been: build experiences that can get to billions of people and focus on monetizing them once you get to scale.”

Meta, of course, has scale, but even that is looking shaky these days. The company reported that daily active users across its family of apps dipped for the first time since 2019.

Alphabet's leadership was far more direct when asked about its own capex climbing through 2027.

“You've seen us over the past several years increase CapEx every year, and we have done it very thoughtfully to meet the demand that we are seeing, both from external customers as well as demands across the organization,” CFO Anat Ashkenazi said. “And you're seeing the proof point, the ROIC on that, in terms of just the growth rate we're seeing, whether it's growth rate within Search or certainly the Cloud business and the opportunity we have within the Cloud backlog.”