Alphabet cuts buybacks to $0, spends $40 billion on AI rival Anthropic

Alphabet repurchased zero shares in the first quarter, ending a decade-long buyback streak that returned close to $300 billion to shareholders, as the company redirected cash into a $40 billion stake in rival AI lab Anthropic and record infrastructure spending.

"The same cash can earn a greater return by building the infrastructure needed to run and sell AI at scale," MacKenzie Sigalos of CNBC said, describing the trade-off Alphabet is asking investors to accept.

Capital expenditures reached $35.67 billion in Q1, up 107 percent from a year earlier, with full-year 2026 guidance set between $175 billion and $185 billion. The company also launched an $80 billion equity raise, its first major stock sale in roughly two decades, to help fund the buildout. Warren Buffett's Berkshire Hathaway contributed $10 billion of that total.

The shift marks a fundamental change in how Alphabet allocates its cash. For the past five years, the Google parent spent more on buybacks than any other major AI hyperscaler, according to CNBC. Now it is betting that AI-serving infrastructure will generate a higher return than the earnings-per-share lift from shrinking its share count. The bet extends to Anthropic, where Alphabet has placed roughly $40 billion in a direct competitor to its own Gemini AI models.

The $190 Billion Infrastructure Bet

Alphabet's 2026 capital spending guidance of $180 billion to $190 billion is roughly double the $91 billion it spent last year, with an even higher figure already flagged for 2027. The spending is capitalized and depreciated over five to six years, meaning today's cash outlay will gradually erode profit as depreciation costs rise.

Google Cloud is the primary venue where Alphabet must prove the investment works. The unit grew 63 percent last quarter to $20 billion at a record margin, and some analysts expect it to reach close to $22 billion when Alphabet reports second-quarter results on July 22 after the close.

Stock Selloff and Investor Skepticism

Alphabet shares fell more than 9 percent between July 16 and 17 after reports that Gemini 3.5 Pro, its most powerful AI model, was delayed. The selling came on heavy volume, suggesting large holders were reducing exposure. Free cash flow roughly halved in the first quarter even as capital spending more than doubled, intensifying scrutiny of every dollar deployed.

The elimination of buybacks removes a key support for Alphabet's stock price. The company had repurchased close to $300 billion over the past five years, more than any other major AI hyperscaler. Investors who relied on that consistent return of capital now face a multiyear period during which Alphabet's AI spending must deliver measurable revenue growth before depreciation costs begin to weigh on earnings.

Alphabet reports second-quarter earnings on July 22. The market will be watching whether Google Cloud can sustain its 63 percent growth rate and whether management provides updated margin targets for its AI infrastructure investments.

This article is for informational purposes only and does not constitute investment advice.