With the stock market looking for big earnings-season indicators amid a recent sell-off, Alphabet stock (GOOG) (GOOGL) traded in choppy style slightly below the flat line after the company posted fourth-quarter earnings that beat expectations on top and bottom lines but also contained a staggering increase in capital spending guidance.
Revenues overall grew 18% to $113.8B, topping expectations for $111.5B, thanks to accelerating growth in Google Services and the increasingly important Google Cloud.
Operating income rose 16% to $35.9B as operating margin held steady at 32% (a number that was consistent for the quarter and the full year). And with a boost in other income, net income increased a full 30% to $34.46B.
And as with other big-tech bellwethers, investor focus was heavily on artificial intelligence spending and benefits. CEO Sundar Pichai signaled that 2026 capital expenditures would come in at $175B-$185B, well above estimates compiled by Bloomberg for $119.5B.
“It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time,” Pichai said in initial reaction to the report. “The launch of Gemini 3 was a major milestone and we have great momentum. Our first-party models, like Gemini, now process over 10 billion tokens per minute via direct API use by our customers, and the Gemini App has grown to over 750 million monthly active users. Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”
Putting that growth into more monetary terms: “Google Cloud ended 2025 at an annual run rate of over $70 billion, representing a wide breadth of customers, driven by demand for AI products,” Pichai said.
Segment results
Segment growth was led again by expansion in Google Cloud, though growth in Search and in Subscriptions, Platforms and Devices matched the overall double-digit company revenue growth rate.
Revenues by segment: Google Search and other, $63.1B (up 16.7%); YouTube ads, $11.4B (up 8.7%); Google Network, $7.83B (down 1.6%); Google subscriptions, platforms, and devices, $13.6B (up 16.7%); Google Cloud, $17.7B (up 47.8B); Other Bets, $370M (down 7.5%).
Operating income by segment: Google Services, $40.1B (up 22.2%); Google Cloud, $5.31B (up 154%); Other Bets, -$3.6B (vs. year-ago -$1.17B); Alphabet-level activities, -$5.9B (vs. year-ago -$2.78B).
Capital spending and cash flow
Another big-tech earnings report means more eyes on capital expenditures amid an AI spending boom.
Capex for 2025 came in at $91.5B, in line with previous company guidance for $91B-$93B.
But against 2026 expectations for capex of $119.5B, Pichai noted: “We’re seeing our AI investments and infrastructure drive revenue and growth across the board. To meet customer demand and capitalize on the growing opportunities we have ahead of us, our 2026 CapEx investments are anticipated to be in the range of $175 to $185 billion.”
Net cash from operations for the fourth quarter landed at $52.4B; less purchases of property and equipment, free cash flow arrived at $24.55B.
For the trailing 12 months, total operating cash flow was $164.7B and free cash flow was $73.3B.
Analyst reaction
“I liked Alphabet’s quarter,” said Seeking Alpha analyst Kenio Fontes. “Search surprised me positively with continued rapid growth, the subscription business continues to scale well, and Google Cloud grew an incredible 48% Y/Y.
“And since most of the increase in expenses was in R&D, I’m not concerned about the margin. I remain bullish on Alphabet in the long term,” he noted, citing ongoing momentum, well diversified revenues and initiatives in varying secular trends.
Live earnings conference call set to come at 4:30 p.m. ET.