Alphabet lifts 2026 capex to $205bn, boosting Lumentum and Celestica outlook
Suppliers Lumentum and Celestica see revenue surges as Alphabet’s capital expenditure forecast rises, underscoring the intensity of the artificial intelligence buildout.
Alphabet has revised its 2026 capital expenditure forecast upwards to between $195 billion and $205 billion, an increase from the previous guidance of $180 billion to $190 billion. The majority of this additional capital is directed toward expanding artificial intelligence infrastructure, reinforcing the scale of the technology sector’s current investment cycle. This decision comes despite Alphabet’s free cash flow turning negative in the previous quarter, a development that has introduced some caution among investors regarding the sustainability of such aggressive spending levels.
The heightened investment is expected to drive significant demand for optical networking components and electronics manufacturing services, directly benefiting key suppliers Lumentum Holdings and Celestica. As hyperscale data centre operators increasingly transition from copper connections to faster optical links, Lumentum has positioned itself to capitalise on the rising need for high-performance laser systems and photonic technologies. The company reported a 90.1 per cent year-on-year revenue increase to $808.4 million for the third quarter of fiscal 2026, beating analyst estimates of $805.4 million.
Celestica, which provides advanced electronics manufacturing and supply chain solutions, has similarly benefited from the infrastructure expansion. The company saw a 52.8 per cent year-on-year revenue rise to $4.05 billion in the first quarter of fiscal 2026, surpassing the $4 billion analyst estimate. In response to this momentum, Celestica has lifted its full-year fiscal 2026 revenue outlook to $19 billion and adjusted its earnings per share forecast to $10.15.
While the broader AI supplier landscape remains competitive, not all participants are sharing in the optimism. Broadcom faces potential competition for tensor processing unit business from MediaTek, although Morgan Stanley has described Broadcom as a core AI winner. The market’s reaction to Alphabet’s spending hike indicates that investors are becoming more selective, favouring suppliers with proven execution and direct exposure to Alphabet’s specific infrastructure requirements.
Lumentum and Celestica appear especially well positioned to benefit from Alphabet’s next phase of expansion. Lumentum’s stock has risen 665.7 per cent over the past 52 weeks, trading at a forward adjusted price-to-earnings multiple of 101.26, well above industry averages. Celestica has gained 92.3 per cent over the same period, with analysts maintaining a strong buy consensus on both names as demand for AI computing power continues to outpace supply.
