On 2 November, the US-based Alphabet, Google’s parent company, launched its second euro-denominated bond issue of the year. The company is raising debt finance against a backdrop of record investment in artificial intelligence, a fall in its share price and growing investor concerns about spending in the technology sector. According to Bloomberg, the new issue will test demand for Google’s debt securities following the recent deterioration in market sentiment.
- Alphabet has launched its second euro-denominated bond issue of 2026.
- The company is offering seven tranches with maturities ranging from two to 19 years.
- The cost of insuring Alphabet’s debt has risen to a record high of nearly 91 basis points.
- Google plans to spend up to $205 billion on capital expenditure this year.
- The new borrowings come in the wake of a record fall in the share price of Google’s parent company.
Alphabet is offering bonds with maturities of up to 19 years
Alphabet has begun accepting applications from investors to purchase bonds, which are divided into seven tranches. The maturities range from two to 19 years.
The current premium over the base rate for two-year bonds stands at approximately 60 basis points, or 0.6 percentage points. For the longest-dated, 19-year bonds, it reaches 205–210 basis points, which corresponds to 2.05–2.1 percentage points.
This refers to a spread over the benchmark swap rate, rather than the full interest rate on the bonds. The final terms will be determined at the time of the issue, depending on investor demand.
The issue is being organised by Barclays, BNP Paribas and Deutsche Bank. The final price of the bonds is expected to be set later on 2 November.
This is Alphabet’s second foray into the European debt market this year. In May, the company raised €9 billion through a bond issue comprising six tranches.
Google’s share price plummeted following its quarterly results
The new bond issue comes just a few days after a sharp fall in Alphabet’s market value.
At the end of October, the company announced its financial results for the third quarter of 2026. Despite a 25% increase in total revenue to $127.6 billion, the figure fell short of analysts’ expectations.
The slowdown in the growth of Google’s advertising business — the corporation’s main source of revenue — was a particular cause for concern.
At the same time, the cloud division Google Cloud posted significantly better results: its quarterly revenue rose by 103% to $30.7 billion. This growth was driven, in particular, by artificial intelligence infrastructure services and sales of its own TPU processor systems.
However, substantial investment in server equipment and data centres has put further pressure on cash flows. At the end of the quarter, Alphabet’s free cash flow was negative, standing at approximately $9.1 billion.
Following the publication of the financial results, the company’s shares suffered their biggest single-day fall in history.
Investors have begun to place a higher premium on Alphabet’s debt risks
The negative market reaction extended not only to Google’s shares but also to instruments insuring its corporate debt.
On Friday, 30 October, inThe cost of credit default swaps (CDS) on Alphabet’s debt rose by 6.4 basis points in a single day — the largest absolute one-day increase in the history of observations.
As a result, the figure reached almost 91 basis points, setting a new high.
CDSs are used to hedge against credit risk. A rise in their price indicates that market participants are demanding higher compensation for assuming the risk associated with a company’s debt obligations.
However, the rise in the cost of such protection does not mean that Alphabet is on the brink of default. It reflects a change in the market’s assessment of risk.
Google plans to spend up to $205 billion on artificial intelligence
Alphabet is maintaining its capital expenditure forecast for 2026 within the range of $195–205 billion. A significant portion of the funds is being channelled into the construction of data centres, the purchase of computing equipment and the expansion of artificial intelligence infrastructure.
The company’s Chief Financial Officer, Anat Ashkenazi, also stated that capital expenditure would rise significantly again in 2027.
According to official reports, Alphabet spent $132 billion on capital expenditure in the first nine months of 2026 alone. For the same period in the previous year, this figure stood at $63.6 billion.
At the same time, the corporation makes extensive use of debt financing. As at 30 September, its long-term debt, at book value, stood at $125.1 billion.
Alphabet is not the only technology company to enter the bond market to finance a large-scale project expansion of AI infrastructure. Meta, Amazon, Microsoft and Oracle are also raising significant amounts of capital to expand their computing capacity.
However, the rise in the debt burden is occurring alongside an increase in expenditure on electricity, server equipment and data centre maintenance. Against this backdrop, investors are increasingly scrutinising how quickly returns from artificial intelligence will be able to recoup the capital invested.
