TLDR
- Alphabet beat Q4 estimates with EPS of $2.82 versus $2.63 expected and revenue of $113.8 billion
- Google Cloud posted 48% revenue growth to $17.7 billion with margins expanding to 30.1%
- Company forecasts 2026 capital spending of $175-$185 billion, far exceeding $115 billion estimates
- Search ad revenue increased 17% year-over-year, beating projections and easing AI worries
- Shares fell 2% after hours to $327 despite beating earnings on all key metrics
Alphabet reported impressive fourth-quarter results Wednesday, but the stock still dropped in after-hours trading. Investors focused on the company’s aggressive spending plans rather than the earnings beat.
The Google parent company posted earnings per share of $2.82, comfortably ahead of the $2.63 Wall Street forecast. Revenue grew 18% to $113.8 billion, topping the $111.3 billion consensus estimate.
Net income surged 30% to $34.5 billion from the prior year. These were strong results across the board.
But the market reacted to different news. Alphabet said it will spend $175 billion to $185 billion on capital expenditures this year.
That represents nearly twice what analysts expected. The Street had forecast around $115 billion in spending.
Shares dropped about 2% to roughly $327 in premarket trading. They had closed at $333 the previous day.
Google Cloud Powers Results
The cloud division delivered standout numbers. Revenue hit $17.7 billion, up 48% compared to last year’s quarter.
Operating margins told an even better story. They climbed to 30.1% from 17.5% a year earlier, crushing the 22.7% analyst estimate.
Cloud backlog expanded 55% from the prior quarter. It now stands at $240 billion.
CEO Sundar Pichai said supply constraints will continue through 2026. Demand for AI computing capacity keeps outpacing supply.
CFO Anat Ashkenazi noted that depreciation expenses will grow faster in 2026. This could impact Google Cloud’s margin performance as spending accelerates.
Advertising Business Stays Resilient
Search advertising revenue jumped 17% in the quarter. This beat expectations and calmed fears about AI search hurting the core business.
YouTube advertising grew slower at 9%. Still, the overall ad business remained strong across Alphabet’s platforms.
AI overviews appear at the top of search results now. These summaries have helped Google maintain its dominant 90% search market share.
The Gemini 3 AI models launched in November. They put Google on equal footing with competitors like OpenAI and Anthropic.
Google’s TPU chips gained traction through partnerships. The company is building its own AI hardware capabilities.
Last year looked different. Google appeared to lag after ChatGPT’s debut in late 2022 caught the company off guard.
Competition from AI startups intensified. Regulatory challenges piled up across multiple markets.
One antitrust case wrapped up with penalties lighter than many expected. Appeals from both parties are ongoing.
Alphabet shares have rallied 81% over six months. Market sentiment has improved dramatically from early 2025 lows.
The planned capital spending targets AI infrastructure. Google is racing with other tech giants to build data centers and develop AI models.
Depreciation expenses rose 38% in 2025 as previous investments aged. That growth rate will jump higher in 2026.
The company still faces competitive pressure and regulatory scrutiny. But the business continues growing despite these headwinds.
Shares traded at $327 Thursday morning, down from the prior close of $333.
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