Alphabet, Google’s parent company, has posted stronger-than-expected fourth-quarter earnings, pushing its annual revenue past $400 billion for the first time. However, the company’s ambitious plan to sharply increase artificial intelligence spending in 2026 unsettled investors and sent its shares lower.
On Wednesday, Alphabet reported Q4 2025 revenue of $113.8 billion, beating Wall Street estimates of $111 billion. The tech giant said full-year revenue also exceeded $400 billion, marking a historic milestone driven by robust growth in search advertising and cloud services.
Despite the upbeat results, Alphabet’s stock dipped nearly 2% after executives revealed plans to double capital expenditure next year. Google now expects to spend between $175 billion and $185 billion in 2026, well above analysts’ forecasts and last year’s outlay of just over $90 billion.
Cloud and Search Drive Growth
Google’s core search advertising business continued to perform strongly, while Google Cloud emerged as a key growth engine. Cloud revenue climbed 48% year over year, reflecting rising enterprise demand for AI-powered infrastructure and services.
The performance helped offset concerns about higher costs linked to the company’s expanding AI ambitions.
Gemini AI User Base Expands
Google also disclosed fresh figures for its flagship AI platform. The Gemini app now has more than 750 million monthly active users, up from 650 million reported in October.
Chief Executive Officer Sundar Pichai said user engagement increased following the launch of Gemini 3 in December, although the pace of user growth has moderated compared with earlier quarters.
Subscriptions Reach Netflix-Level Scale
In addition, Alphabet reported that it now has over 325 million paid subscriptions across consumer services, including YouTube Premium and Google One. The figure matches Netflix’s global subscriber count, highlighting YouTube’s expanding role in the global streaming market.
AI Costs Fall as Investment Rises
Pichai said Google’s full-stack approach to AI—spanning models, chips, and cloud infrastructure—has delivered significant cost efficiencies. According to the company, Gemini’s serving unit costs fell 78% in 2025, allowing Google to scale AI products more efficiently.
Addressing recent concerns about AI disrupting software-as-a-service companies, Pichai described the fears as overstated. He said AI tools such as Gemini act as enablers rather than replacements, creating new opportunities for companies that adapt quickly.
While Alphabet’s earnings beat expectations, investor focus has shifted to how effectively Google can balance record revenues with its escalating AI investment strategy in the years ahead.
