Alphabet’s shares fell 5% on Thursday despite reporting fourth-quarter revenue of $113.83 billion, above analysts’ estimate of $111.43 billion. Google Cloud posted $17.66 billion in revenue, surpassing the $16.18 billion forecast, while YouTube advertising generated $11.38 billion, slightly below the $11.84 billion estimate. The results underscore strong performance in cloud and AI-driven services, even as other segments face headwinds.
The company announced plans to more than double its 2026 capital expenditure to $175–185 billion, with a significant portion earmarked for AI compute infrastructure supporting Google DeepMind. Analysts noted that increased spending on DeepMind, Google Cloud, and Waymo will continue to pressure overall profitability next year. Barclays highlighted strong enterprise adoption of Google Cloud, rising API token usage, and Gemini integration as key factors driving long-term growth.
Deutsche Bank called the capex expansion “unprecedented” and flagged uncertainty about its impact in the current tech market environment. Executives emphasized that AI remains central to Alphabet’s strategy, with investments aimed at accelerating model development and search enhancements. While near-term costs may weigh on earnings, the company’s AI initiatives are positioned to support long-term growth and competitiveness across cloud, advertising, and AI services.
