Google Just Announced a Massive Expansion

After spending over $25 billion in capital expenditures in 2018, Alphabet (GOOG +0.52%) (GOOGL +0.56%) subsidiary Google announced this week that it plans to invest another $13 billion in offices and data centers around the U.S. this year. That's up from the roughly $9 billion that the search giant spent on corporate facilities last year. Google had also said in December that it would invest $1 billion into expanding its existing presence in New York City, which is being included in the $13 billion that Google is earmarking for 2019.

Here's what investors need to know.

One of Google's data centers. Image source: Google.

Hey, big spender

The expansions will include entirely new developments, as well as growing existing offices and data centers all over the country. Google will add capacity to hire "tens of thousands of employees" and will end up having a presence in 24 states, according to CEO Sundar Pichai. Alphabet finished 2018 with nearly 99,000 full-time employees, according to its annual report.

Google is also investing in renewable energy as part of its plan to power its facilities with 100% renewable energy. Apple achieved its goal of powering all global facilities with 100% renewable energy last April.

Google wants to expand its data center footprint in order to strengthen its online services, ensuring fast and reliable performance.

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The tech giant is also aggressively trying to catch up to rivals in the cloud infrastructure market, and the data center investments will help power its Google Cloud Platform (GCP). The GCP business is "one of the fastest-growing businesses" at Alphabet, CFO Ruth Porat said during the earnings call earlier this month, and more data centers translates into greater cloud computing capacity.

"We are continuing with the ground-up development projects. As a reminder, we do favor owning rather than leasing real estate when we see good opportunities and that has served us well over the years," Porat had said last April. "But I think more to your question with respect to technical infrastructure, that reflects investments in compute power to support growth that we see across Google."

Check out all our earnings call transcripts.

The big get bigger

The $13 billion will likely represent the bulk of Google's capital expenditures for 2019. While the company did not provide a specific forecast for capital spending this year, Porat said that the growth rate for capital expenditures in 2019 is expected to "moderate quite significantly." For reference, $13 billion would be comparable to what the company spent in 2017, and more than it invested in 2016.

 Data source: 10-K.

Spending needs in Other Bets has declined significantly, mostly because the company has ceased expanding Google Fiber. Google is already one of the biggest tech giants in the U.S., and its footprint is about to get even bigger.