Google parent Alphabet (GOOGL 1.26%) (GOOG 1.14%) made a decision that seemed unthinkable until recently. It announced it will issue $80 billion worth of shares, a move that will slightly dilute its stock.
On the surface, the move seems hard to believe. As of the end of the first quarter, it held $127 billion in cash, and its digital ad business generated over $64 billion in free cash flow over the trailing 12 months.
That situation forces investors to confront this investment thesis head-on. Do the massive capital expenditures (capex) spending and share sales mean investors should sell the communications stock, or should they continue to hold shares in the Google parent?
Image source: The Motley Fool.
Alphabet’s capex spending
Despite Alphabet’s tremendous financial resources, the capex spending seems concerning on the surface. The company pledged to spend between $175 billion and $185 billion in capex in 2026 as it seeks to compete in the artificial intelligence (AI) market. This is after it spent $91 billion in capex last year.
Nonetheless, before panicking, investors should put the share sale into perspective. Alphabet’s market cap is almost $4.5 trillion. This means that the $80 billion should increase the share count by under 2%. Considering that the stock rose by around 120% in the last year alone, the added shares may escape the notice of most investors.
Today’s Change
(-1.26%) $-4.64
Current Price
$363.67
Key Data Points
Market Cap
$4.4T
Day’s Range
$360.55 – $366.14
52wk Range
$162.00 – $408.61
Volume
875.3K
Avg Vol
29.1M
Gross Margin
60.43%
Dividend Yield
0.29%
Moreover, Alphabet has likely increased capex spending so dramatically because it seems to be paying off. As previously mentioned, the company generated more than $64 billion in free cash flow over the last year, a figure that subtracts capex spending. One year ago, when capex spending was considerably lower, the company generated almost $75 billion over the previous 12 months.
Additionally, yearly revenue growth rose from 12% in the first quarter of 2025 to 22% in Q1 of 2026. This includes a revenue increase for the AI-focused Google Cloud from 28% in Q1 2025 to 63% one year later. Amid such improvements, investors may want to consider the benefits of the capex spending before reacting to what are admittedly massive cash outlays.
Should investors sell Alphabet?
Given the effects of higher capex spending, investors should not only hold their Alphabet shares but also consider buying some of the newly issued shares. Indeed, spending up to $185 billion in capex in one year and issuing shares to pay for it may not comfort investors when viewed in isolation.
Fortunately, Alphabet still has everything one looks for in a long-term winner. The spending seems to have already generated rapid revenue growth, persuading investors to overlook somewhat lower free cash flows.
Ultimately, considering that the benefits of the capex spending appear to outweigh the massive costs, it seems the company has made a prudent decision by issuing shares to raise capital.
