Google's capital expenditures doubled in 2018, the fastest growth in at least four years

Key Points
  • Capital expenditures topped $25 billion in 2018.
  • In the battle for the cloud, Google spent considerably more last year than Microsoft.
Ruth Porat, Alphabet CFO
Adam Galica | CNBC

Google's capital spending is growing much faster than its revenue.

Alphabet said in Monday's earnings report that Google's capital expenditures, which include the costs of data centers and other facilities, more than doubled in 2018, the fastest expansion in at least four years.

While the vast majority of Google's revenue comes from advertising, the company has been picking up more business from cloud applications and cloud-based infrastructure, which requires data center equipment. Google also continues to hire rapidly across the globe, requiring it to buy and lease more space for people to work.

Google's capital expenditures in 2018 increased 102 percent to $25.46 billion, up from a growth rate of 34 percent in 2017. In the fourth quarter, spending surged 80 percent to $6.85 billion, while revenue rose 21 percent to $39.1 billion. (Alphabet reported total sales of $39.3 billion.)

Alphabet spent much more last year than rival Microsoft, which shelled out $16 billion in capital expenditures, up less than 39 percent year over year.

Data center expansion is critical for Google as is builds out its cloud computing capacity. Additionally, the company bought Chelsea Market in New York and has made real estate investments since in places including Texas.

"With respect to capex [capital expenditures], we continue to invest in both compute requirements and for office facilities, although we expect the capex growth rate in 2019 to moderate quite significantly," Alphabet's chief financial officer, Ruth Porat, told analysts on a conference call following the earnings release.

Alphabet's headcount in 2018 rose 23 percent to 98,771. Porat said headcount growth will moderate in 2019.

CORRECTION: This article has been updated with the correct full-year capital expenditures for Google in 2018.

WATCH: Watch these two big metrics in Alphabet's earnings report

Watch these two big metrics in Alphabet's earnings report
Watch these two big metrics in Alphabet's earnings report