TLDR
- Alphabet reported Q4 earnings per share of $2.82, beating expectations of $2.63, with revenue hitting $113.8 billion versus the expected $111.3 billion
- Google Cloud revenue surged 48% year-over-year to $17.7 billion, with operating margins expanding to 30.1% from 17.5% a year ago
- The company plans to spend $175 billion to $185 billion on capital expenditures in 2026, nearly doubling from previous year and well above the $115 billion analysts expected
- Search ad revenue grew 17% in Q4, beating estimates and easing fears about AI search impact, though YouTube ads only increased 9%
- Alphabet stock dropped 2% in after-hours trading to around $327 despite the earnings beat, as investors digested the massive spending plans
Alphabet posted strong fourth-quarter results on Wednesday but watched its stock slip in after-hours trading. The reason? A spending plan that caught Wall Street off guard.
The Google parent company reported earnings per share of $2.82, crushing analyst expectations of $2.63. Revenue climbed 18% to $113.8 billion, topping the consensus estimate of $111.3 billion.
Net income reached $34.5 billion, up 30% from the same quarter last year. These numbers looked good on paper.
But then came the spending forecast. Alphabet said it plans to invest between $175 billion and $185 billion in capital expenditures this year.
That’s nearly double what the company spent previously. Analysts had been expecting around $115 billion.
Shares fell roughly 2% in premarket trading to around $327. They had closed at just over $333 on Tuesday.
Cloud Business Powers Growth
Google Cloud delivered the standout performance. The division pulled in $17.7 billion in revenue, jumping 48% compared to last year.
Operating margins told an even better story. They expanded to 30.1% in the fourth quarter, up from 17.5% a year earlier. Wall Street had only expected 22.7%.
Cloud backlog grew 55% since the previous quarter. It now sits at $240 billion.
CFO Anat Ashkenazi warned that depreciation expenses would accelerate in 2026. This could eat into Google Cloud’s margins as the spending ramps up.
CEO Sundar Pichai said the company still expects to face supply constraints this year. The demand for AI computing power keeps growing.
Search ad revenue rose 17% in the fourth quarter. This beat expectations and calmed worries about AI search eating into traditional advertising.
YouTube ads grew slower, up just 9% for the quarter. Still, Alphabet’s overall advertising business performed well.
AI Investment Race
The massive capital spending goes toward AI infrastructure. Google, like its tech peers, is pouring money into data centers and AI development.
All that spending shows up on the income statement as depreciation. These expenses jumped 38% in 2025.
The company released its Gemini 3 AI models in November. These finally put Google on equal footing with OpenAI and Anthropic.
AI overviews now appear at the top of Google search results. These AI summaries have helped maintain Google’s near 90% market share in search.
The company’s TPU chips gained traction through a partnership with Anthropic. Google developed these AI chips in-house.
A year ago, things looked different. Google seemed caught off guard by ChatGPT’s capabilities when it launched in late 2022.
The company struggled to keep pace with AI startups. Regulatory pressure mounted in the U.S. and abroad.
One antitrust case, U.S. v. Google, wrapped up with lighter penalties than feared. Both Google and the Justice Department are appealing.
Alphabet stock has climbed 81% over the past six months. Investor sentiment has shifted from doom and gloom to cautious optimism.
The company still faces tough competition and regulatory scrutiny. But for now, the business keeps growing.
Shares traded at $327 in premarket hours Thursday, down from the $333 closing price.
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