Key Takeaways:
Alphabet is expected to report $44.9 billion in quarterly capital expenditures, double the prior year, as Big Tech's AI infrastructure buildout reaches a new intensity.
Big Tech's artificial intelligence spending is accelerating into earnings season, with Alphabet expected to report $44.9 billion in second-quarter capital expenditures — double the year-ago period — as companies borrow at record levels to fund data center construction.
"The bar for earnings has been raised substantially because estimates have climbed so much," said Mark Hackett, chief market strategist at Nationwide. "The question is whether companies can deliver on that profit promise."
Alphabet's projected CapEx of $44.9 billion represents a 100% increase from the prior year, according to analyst estimates compiled by LSEG IBES. Across the broader market, S&P 500 companies are expected to report aggregate earnings growth of 23.4% for the second quarter, up from the 15.2% expected at the start of the year. First-quarter results came in even stronger at 29.4%, the highest quarterly growth in more than four years.
The spending surge is being financed partly through debt markets. Six AI-focused companies — Amazon, Alphabet, Meta Platforms, Nvidia, Oracle and SpaceX — have collectively issued $182 billion of investment-grade bonds in 2026, a 1,300% increase from the $13 billion raised during the same period last year, according to Bloomberg data. The borrowing binge raises the stakes for earnings season: if AI investments fail to produce proportional revenue growth, balance sheets could come under pressure.
A $182 Billion Debt Backing for AI
The six companies now account for nearly 15% of all US corporate bond issuance this year while generating more than half of the overall growth in the investment-grade bond market, Bloomberg reported. Seven corporate bond offerings worth at least $25 billion have been completed in 2026, matching the total number recorded from 2019 through 2025 combined. Six of those came from the AI leaders.
The borrowing reflects a simple reality: AI infrastructure costs hundreds of billions of dollars before it produces meaningful returns. Meta Platforms alone is expected to spend up to $145 billion on AI infrastructure this year, according to company guidance. Amazon received a relatively cool reception for a $25 billion bond issuance this week, while S&P Global Ratings downgraded Oracle to the lowest investment-grade rating because of its AI spending binge.
Earnings Season Tests the Thesis
Second-quarter earnings season kicks off next week with reports from major banks including JPMorgan Chase and Goldman Sachs, followed by high-profile technology companies such as Netflix and Johnson & Johnson. Meta is expected to report later this month, with investors watching whether its AI investments are beginning to support revenue growth while keeping spending under control.
The risk, according to Yardeni Research, is that analysts raised their estimates for the remaining three quarters by too much after first-quarter results exceeded expectations. Technology sector profit growth is expected to reach 65.5% in the second quarter, while energy earnings are projected to rise about 115% as oil prices spiked following geopolitical tensions.
"The risk is that Q1's exceptionally strong results led analysts to raise their estimates for the remaining three quarters by too much," Yardeni Research said in a note.
For investors, the math is straightforward. The S&P 500 has climbed 9% in 2026, while estimates for year-forward earnings are up 21%, according to LSEG Datastream. That divergence has helped moderate valuations — the forward price-to-earnings ratio for the S&P 500 stands at 20.1, down from 22.2 at the end of 2025. But it also leaves little room for error.
"I would not expect big moves in tech stocks and other stocks unless they beat by a wide mile," said Bruce Zaro, managing director at Granite Wealth Management. "Those earnings bars have been set at a higher level now."
This article is for informational purposes only and does not constitute investment advice.
