Alphabet, Google's parent company, reported Q4 2025 earnings that exceeded market expectations in both revenue and profit, underscoring a strong close to the year. The company announced a major AI infrastructure investment plan, projecting 2026 Capex to surge to $185 billion—more than double 2025's spending—resetting investment ceilings well above estimates from other hyperscale competitors. However, following the announcement, Alphabet shares dropped about 3% in after-hours trading.
Despite short-term negative market reactions, the business fundamentals clearly show growth. Google's full-year revenue surpassed $400 billion for the first time, while Q4 revenue reached $113.8 billion, up 18% year-over-year. Net profit rose nearly 30% to $34.469 billion, with earnings per share (EPS) of $2.82.
The main drivers remain Search Advertising and Google Cloud, which stood out in this quarter's financials. Google Cloud revenue increased 48% year-over-year, reflecting strong AI and cloud demand from enterprise customers. Advertising revenue totaled $82.28 billion, up 13.5% year-over-year, while YouTube advertising revenue grew nearly 9% to $11.38 billion.
The market's key focus was Alphabet's investment plan surpassing all competitors. Alphabet clearly stated it would increase 2026 Capex to $175–185 billion—nearly double 2025’s amount. Funds will be allocated to data centers, AI chips, infrastructure, and cloud systems to support AI growth in all dimensions—from Google DeepMind to commercial services—especially rapidly growing Cloud customer demand. The company added this investment will enhance user experience and improve return on investment (ROI) for advertisers on Google's services.
This Capex announcement exceeds market expectations and outpaces major competitors. Microsoft did not provide full-year forecasts but indicated Capex would decline quarter-over-quarter, while Meta expects 2026 Capex of $115–135 billion, nearly double last year but still below Alphabet’s plan. Amazon’s report is forthcoming.
This higher spending sets a new standard for AI infrastructure competition, becoming one of the largest AI-related investments in the global tech industry. Alphabet’s record Capex also signals that the next phase of AI competition will focus on who builds the fastest, most powerful infrastructure—even if it means facing short-term capital market pressure.
Another key signal is Gemini’s growth, currently boasting over 750 million monthly users, up from 650 million last quarter. Sundar Pichai, Alphabet’s CEO, noted that since Gemini 3 launched in December, user engagement has significantly increased.
Although new user growth has slowed from the surge driven by viral features like Nano Banana, the overall trend shows continued AI Consumer market capture. Strategically, this positions Gemini as one of few players with a user scale comparable to ChatGPT, with potential integration across Search, Workspace, Android, and Cloud.
Alphabet also emphasized AI cost control capabilities. Pichai stated that Google reduced Gemini’s unit service costs by 78% throughout 2025 through model improvements, efficiency gains, and resource optimization. This strength derives from Google’s full-stack AI approach, covering models, chips, servers, and cloud, providing a structural advantage over many competitors.
Overall, Alphabet closed 2025 with revenue and profit surpassing expectations while launching 2026 with serious AI investment. Although this brings short-term capital market pressure, it demonstrates Alphabet’s AI capabilities in user scale, infrastructure, and cost advantage, positioning it strongly in this year’s AI competition.
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